Fortnightly - Boeinghttp://www.fortnightly.com/tags/boeing
enRooftop Tsunamihttp://www.fortnightly.com/fortnightly/2012/07/rooftop-tsunami
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Utilities sound the alarm as PV nears grid parity.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Michael T. Burr, Editor-in-Chief</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Frontlines</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Michael T. Burr</b> is <i>Fortnightly’s</i> editor-in-chief. Email him at <a href="mailto:burr@pur.com">burr@pur.com</a></p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - July 2012</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>In this month’s Vendor Neutral column (and shown to the right here on Fortnightly.com), you’ll find two aerial photos of solar projects—a 1.65-MW installation on the roof of a convention center, and a 12.5-MW array covering 100 acres. These two projects are similar in that they both were developed and are owned by non-utility generators, in states with strong incentives for solar energy. But despite the fact that the ground-based array has almost 10 times the capacity of the solar roof, the rooftop project represents something more important for the industry.</p>
<p>From the utility’s point of view, a growing wave of rooftop PV projects is starting to look ominous. And now, some utilities are taking action to shore up their defenses—advocating legislative and regulatory changes that pull back net metering policies and other solar incentives.</p>
<p>Concerns focus in part on operational challenges from integrating dispersed generation that’s variable, non-dispatchable, and sometimes beyond the utility’s ability to control. But the biggest worry seems to involve the prospect of a fixed-costs dilemma, which I addressed in this column last issue. <i>(see “</i><em><a href="http://www.fortnightly.com/fortnightly/2012/06/facing-facts-about-solar" target="_blank">Facing Facts</a></em><i><em>,</em>” Fortnightly, June 2012.) </i>The shorthand is this: As PV gets cheaper, an increasing number of PV-owning customers will pay less than their fair share of utility system costs, leaving a shrinking number of non-solar customers to pick up the tab for keeping the lights on. Although PV’s market penetration is tiny today, it’s growing rapidly enough to raise real concerns for many utilities.</p>
<p>“Distributed generation is becoming one of the largest subsidies on our system,” said Ron Litzinger, president of Southern California Edison, during a panel discussion at this year’s Edison Electric Institute Annual Convention. “That subsidy tends to go from low-income to higher-income customers. We need to make sure all the costs of distributed generation are known before decisions are made.</p>
<p>“Left unchecked, we could see rates increase by 40 to 50 percent by 2020, which we know isn’t sustainable.”</p>
<h4>Tectonic Shifts</h4>
<p>It’s no surprise that California utilities are among the first to raise the alarm about rooftop PV, given the state’s aggressive renewable portfolio standards and rooftop solar goals. Pacific Gas &amp; Electric, for example, reportedly is interconnecting about 1,000 solar roofs each month—a mind-boggling rate for a technology whose effects on the system aren’t yet fully understood.</p>
<p>But the problem isn’t limited to left-leaning states. In Georgia, for example, where net metering interconnections already are capped at 0.2 percent of peak demand, utilities—including Southern Company’s Georgia Power—are advocating legislation that would prevent third parties from owning retail customers’ PV panels. That would make it harder for customer load to leave the grid—and would allow time to plan for an orderly transition toward a solar-powered world. Perhaps a world that’s built by the utility.</p>
<p>Similarly, in South Carolina, net metering capacity also is capped at 0.2 percent, and some utilities already impose special fees and tariff conditions on net-metering customers. And yet, utilities in that state worry about losing load to independently owned PV capacity. Speaking at the EEI convention, Catherine Heigel, Duke Energy South Carolina’s president, said the utility lost an industrial customer—a BMW assembly plant—because it failed to meet the customer’s demand for 100-percent renewable energy.</p>
<p>“We weren’t able to do what BMW wanted, and they walked away and did their own projects,” Heigel said. Duke subsequently was more successful in working with another customer, Boeing, to provide renewable energy for its Dreamliner assembly plant. But Heigel sees such examples as the first tremors in a tectonic shift that might begin to overwhelm the industry’s regulatory foundations.</p>
<p>“The challenge is to get new rate designs in place before the tsunami of distributed generation starts to hit,” Heigel said.</p>
<h4>Stacking Sandbags</h4>
<p>While utilities increasingly are raising questions about net metering and other solar incentives, it’s not clear yet whether policy makers will take their objections at face value—or whether they’ll suspect utilities are crying wolf.</p>
<p>For now at least, policy makers seem inclined to encourage more solar. In late May, for instance, the California Public Utilities Commission (CPUC) expanded the scope of California’s feed-in tariff program, doubling the size of projects that can qualify—from 1.5 MW to 3 MW. It also changed the state’s net-metering rules in a way that increases the cap on net metering from 5 percent to more than 11 percent. The commission explicitly rejected utilities’ claims that low-income customers were being saddled with high costs for accommodating PV installed on mansion roofs. “My barber has solar panels,” said Commissioner Timothy Simon. “We should expand solar and the net-metering program in low-income communities.” <em>(See CPUC Decisions <a href="http://docs.cpuc.ca.gov/word_pdf/FINAL_DECISION/167591.pdf" target="_blank">12-05-036</a> and <a href="http://docs.cpuc.ca.gov/word_pdf/FINAL_DECISION/167679.pdf)" target="_blank">12-05-035</a>.)</em></p>
<p>At the same time, the commission acknowledged utilities’ concerns by ordering what Commissioner Mark Ferron called “a comprehensive study to evaluate the costs and benefits to participants and non-participants.” What the study might yield is anyone’s guess, but some utilities aren’t waiting to find out. With support from Southern California Edison and San Diego Gas &amp; Electric, Assemblyman Steven Bradford (D-Gardena) introduced a bill (AB 2514) that would direct CPUC to reverse its decision on the net-metering cap, while putting the assembly’s mandate behind a study like the one the commission already ordered.</p>
<p>How the dispute proceeds in California might presage similar conflicts in other states across the country. The concerns being expressed now by utility executives—such as Litzinger, Heigel, and others who spoke at the recent EEI event—suggest the industry is gearing up for a long struggle against what seems to be a rising tide.</p>
</div></div></div><div class="field-collection-container clearfix"><div class="field field-name-field-sidebar field-type-field-collection field-label-above"><div class="field-label">Sidebar:&nbsp;</div><div class="field-items"><div class="field-item even"><div class="field-collection-view clearfix view-mode-full field-collection-view-final"><div class="entity entity-field-collection-item field-collection-item-field-sidebar clearfix">
<div class="content">
<div class="field field-name-field-sidebar-title field-type-text field-label-above"><div class="field-label">Sidebar Title:&nbsp;</div><div class="field-items"><div class="field-item even">Transition to a PV World</div></div></div><div class="field field-name-field-sidebar-body field-type-text-long field-label-above"><div class="field-label">Sidebar Body:&nbsp;</div><div class="field-items"><div class="field-item even"><!--smart_paging_autop_filter--><!--smart_paging_filter--><p>Keeping the lights on in a world of mushrooming solar rooftops requires several key technology and policy developments. During the 2012 EEI Annual Convention, panelists on a session titled “Distribution 2020: Implications of a Rapidly Evolving Distribution Grid,” offered several suggestions for managing the transition.</p><h4>Technology requirements:</h4><p>• Bi-directional smart grid</p><p>• New safety protocols</p><p>• Uniform interconnection standards</p><p>• Integrated distribution management systems (DMS)</p><h4>Policy requirements:</h4><p>• Focus incentives on installations in preferred locations</p><p>• Push the limits of demand response with direct load control</p><p>• Plan holistically—account for the total costs of distributed generation</p><p>• Apply formula rates to keep utilities whole</p><p>• Accelerate depreciation appropriately</p></div></div></div> </div>
</div>
</div></div></div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/renewables-solar-11505">Solar</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/states">The States</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/smart-grid">Smart Grid</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/frontlines">Frontlines</a></li></ul></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1207-FR.jpg" width="635" height="790" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/pv">PV</a><span class="pur_comma">, </span><a href="/tags/photovoltaics">Photovoltaics</a><span class="pur_comma">, </span><a href="/tags/non-utility-generator">non-utility generator</a><span class="pur_comma">, </span><a href="/tags/ground-based-array">ground-based array</a><span class="pur_comma">, </span><a href="/tags/solar-project">solar project</a><span class="pur_comma">, </span><a href="/tags/rooftop">rooftop</a><span class="pur_comma">, </span><a href="/tags/net-metering">Net metering</a><span class="pur_comma">, </span><a href="/tags/solar-incentives">solar incentives</a><span class="pur_comma">, </span><a href="/tags/dispersed-generation">dispersed generation</a><span class="pur_comma">, </span><a href="/tags/fixed-cost">fixed-cost</a><span class="pur_comma">, </span><a href="/tags/ron-litzinger">Ron Litzinger</a><span class="pur_comma">, </span><a href="/tags/southern-california-edison">Southern California Edison</a><span class="pur_comma">, </span><a href="/tags/edison-electric-institute-annual-convention">Edison Electric Institute Annual Convention</a><span class="pur_comma">, </span><a href="/tags/renewable-portfolio-standards">Renewable portfolio standards</a><span class="pur_comma">, </span><a href="/tags/pacific-gas-electric">Pacific Gas &amp; Electric</a><span class="pur_comma">, </span><a href="/tags/georgia-power">Georgia Power</a><span class="pur_comma">, </span><a href="/tags/catherine-heigel">Catherine Heigel</a><span class="pur_comma">, </span><a href="/tags/duke-energy">Duke Energy</a><span class="pur_comma">, </span><a href="/tags/boeing">Boeing</a><span class="pur_comma">, </span><a href="/tags/dreamliner">Dreamliner</a><span class="pur_comma">, </span><a href="/tags/california-public-utilities">California Public Utilities</a><span class="pur_comma">, </span><a href="/tags/dpuc">DPUC</a><span class="pur_comma">, </span><a href="/tags/mark-ferron">Mark Ferron</a><span class="pur_comma">, </span><a href="/tags/san-diego-gas-electric-0">San Diego Gas &amp; Electric</a><span class="pur_comma">, </span><a href="/tags/steven-bradford">Steven Bradford</a> </div>
</div>
Sun, 01 Jul 2012 04:00:00 +0000puradmin14649 at http://www.fortnightly.comKilling Coalhttp://www.fortnightly.com/fortnightly/2011/08/killing-coal
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>A senator’s crusade limits America’s options.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Michael T. Burr, Editor-in-Chief</p>
</div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Frontlines</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><span class="s1"><strong>Michael T. Burr</strong> is <em>Fortnightly’s</em> editor-in-chief. Email him at </span><span class="s2"><a href="mailto:burr@pur.com">burr@pur.com</a>.</span></p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - August 2011</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>At the end of May, President Obama nominated one of the industry’s own to a top post in his cabinet. He picked John Bryson, former CEO of Edison International, to become Commerce secretary. Bryson is an interesting choice, bringing business acumen and environmental awareness to the Commerce Department. Aside from being Edison’s CEO, Bryson served on the boards of Boeing, Walt Disney and solar project developer BrightSource Energy. Additionally, back in 1970, he co-founded the National Resources Defense Council (NRDC). Bryson left NRDC in the mid-’70s, but the organization went on to become one of the country’s most important environmental advocacy groups.</p>
<p>Of course, the business of Washington is politics, and the majority party in Congress rarely gives the other party’s president anything without getting something in return. So Republican lawmakers said they wouldn’t ratify Bryson’s nomination until the president advanced certain free-trade agreements that they favor—a negotiating tactic that seemed largely unrelated to Bryson himself. However, in mid-July Sen. James Inhofe (R-Okla.) put his own “hold” on Bryson’s nomination, in effect vowing to filibuster it, no matter what happens with the trade agreements.</p>
<p>Inhofe is the Senate’s most outspoken critic of environmental regulation; the senator has called mainstream climate-change theory “an article of religious faith,” and the “greatest hoax ever perpetrated.” Last year he sought to strip the Environmental Protection Agency (EPA) of its regulatory authority under the <i>Clean Air Act</i>.</p>
<p>As such, Inhofe objects to Bryson on the basis of his environmental positions. “The fact that he’s being nominated to be secretary of Commerce is so ironic, because here’s a guy who wants to kill commerce,” Inhofe said at a press conference on July 12. As evidence, Inhofe cites Bryson’s involvement with the NRDC, which he calls “a radical … left-wing environmentalist organization, which in the name of global warming, seeks to increase drastically the price of electricity and gasoline across America.”</p>
<p>But Inhofe’s attack seems to be aimed as much at Pres. Obama—in the run-up to next year’s election—as it is at Bryson. With the country worried about an anemic economy and a looming global financial crisis, Inhofe paints Obama’s selection as a black-and-white choice between jobs and the environment. “You don’t hear President Obama talking about global warming lately,” he said. “He understands that his green agenda is not popular, but his choice of John Bryson … clearly indicates that he has not given up trying to implement it… But with 9.2-percent unemployment, there is no question that the president’s green agenda has failed miserably.”</p>
<p>Inhofe’s attempt to block Bryson might be mostly about election politics. But it adds to the chaos that frustrates clean coal development and constrains America’s energy options.</p>
<h4>Advocating Pragmatism</h4>
<p>In some respects, Inhofe’s attack against Bryson seems peculiar and poorly targeted. After all, Bryson won’t be leading EPA or DOE, but Commerce, which is best known for handling international trade policy and patent applications. Granted, Commerce also includes the National Oceanic and Atmospheric Administration (NOAA), which performs climate monitoring; that’s an important agency, to be sure, but it’s hardly an environmental policy juggernaut.</p>
<p>Also, despite his green sympathies, Bryson is no leftist hippie. He spent most of his career (from 1982 through 2008) guiding one of America’s biggest power companies through California’s economic and regulatory tumult. Further, his positions on climate change over the past decade have been no more progressive than those of many other industry leaders—such as Michael Morris at AEP or James Rogers at Duke, both among the largest coal-burning utilities.</p>
<p>In 2004 Bryson said, “[In the] long term, a reasonable and balanced cap-and-trade system for reducing carbon dioxide emissions could be adopted once new carbon dioxide removal technology has been developed and becomes commercially available”—hardly a clarion call for drastic action. A few years later, he was among the industry’s rank and file at the Edison Electric Institute (which he chaired from 1998 to 1999) in proposing a modest cap-and-trade policy. The proposal would’ve minimized the pain for coal-dependent states by providing free allowances for 100 percent of utility carbon emissions—and bringing badly needed regulatory certainty to the market.</p>
<p>“We couldn’t make the investments we needed under the kind of massive uncertainty that existed at the time,” Bryson told Sen. Kay Bailey Hutchison (R-Texas) during a hearing this June. “We needed some predictability, and it was chaos at the time.”</p>
<p>The EEI proposal’s failure was “so ironic,” to paraphrase Inhofe, because the resulting uncertainty has practically killed coal-fired power development in the United States <i>(see “<a href="http://www.fortnightly.com/fortnightly/2008/12/good-news-coal">Good News for Coal</a>,” December 2008)</i>.</p>
<p>Just as this issue of <i>Fortnightly</i> was going to press, on July 20, I received a press release that Sen. Inhofe might also find ironic. The release was from Battelle, the independent R&amp;D laboratory, announcing that it had “successfully complete[d]” a carbon-storage project at AEP’s Mountaineer coal-fired power plant in New Haven, W.Va. The project demonstrated for the first time that carbon capture and sequestration (CCS) technology could be deployed at commercial scale, offering a path forward for coal-fired power development. By any measure the project can be considered a success, except for one point—and therein the irony:</p>
<p>One week earlier—just as Inhofe was throwing down his gauntlet against Bryson—AEP canceled its longstanding plans for scaling-up the Mountaineer CCS system.</p>
<p>The utility said it shelved the project primarily because it no longer expected state regulators would approve pass-through of some $330 million in costs—which, after all, involve forward-looking technology R&amp;D rather than the utility’s immediate obligations. AEP’s Morris told the <i>New York Times</i> that coal-burning utilities are caught in a quandary: they “need to develop carbon-capture technology to meet any future greenhouse-gas emissions rules, but cannot afford the projects without federal standards that will persuade the states to allow reimbursement.”</p>
<p>Probably it was just a coincidence that Inhofe blocked Bryson’s nomination just as AEP stopped the Mountaineer project. But AEP’s decision quite possibly was influenced by a U.S. Supreme Court decision three weeks earlier.</p>
<p>In <i>American Electric Power v. Connecticut</i>, the High Court threw out a state-led nuisance lawsuit against AEP and other utilities, saying that states lack standing to sue under common law. The Court’s decision rests on the fact that Congress gave EPA the authority to enforce the <i>Clean Air Act</i>, and that EPA is in fact developing regulations after finding in 2009 that CO2 emissions “threaten public health and welfare”—triggering a need for regulation under the act. That need for regulation, and the lack of it, is exactly what forced AEP to abandon its CCS development plans—and drove other companies to abandon coal as a near-term option for fueling new power plants.</p>
<p>In a final twist, Inhofe sent a letter to EPA Administrator Lisa Jackson this spring, advising her to nullify carbon regulations already taking effect, and threatening Congressional action against EPA if the agency proceeds with the regulatory process. If Inhofe were to get his way, and Congress stripped EPA of its authority under the <i>Clean Air Act</i>, then the basis for the Court’s decision in <i>AEP v. Connecticut</i> would disappear. That would, ironically, reopen the door to the states’ common-law complaints—further raising the uncertainty level, and making clean coal technology even more crucial, but no easier to finance.</p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/environmental">Environmental</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/energy-policy-legislation">Energy Policy &amp; Legislation</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/coal">Coal</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/frontlines">Frontlines</a></li></ul></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1108/images/1108-FR.jpg" width="320" height="480" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/aep">AEP</a><span class="pur_comma">, </span><a href="/tags/american-electric-power">American Electric Power</a><span class="pur_comma">, </span><a href="/tags/barack-obama">Barack Obama</a><span class="pur_comma">, </span><a href="/tags/battelle">Battelle</a><span class="pur_comma">, </span><a href="/tags/boeing">Boeing</a><span class="pur_comma">, </span><a href="/tags/brightsource">BrightSource</a><span class="pur_comma">, </span><a href="/tags/brightsource-energy">BrightSource Energy</a><span class="pur_comma">, </span><a href="/tags/ccs">CCS</a><span class="pur_comma">, </span><a href="/tags/clean-air-act">Clean Air Act</a><span class="pur_comma">, </span><a href="/tags/co2">CO2</a><span class="pur_comma">, </span><a href="/tags/co2-emissions">CO2 emissions</a><span class="pur_comma">, </span><a href="/tags/commerce-secretary">Commerce Secretary</a><span class="pur_comma">, </span><a href="/tags/congress">Congress</a><span class="pur_comma">, </span><a href="/tags/dc">DC</a><span class="pur_comma">, </span><a href="/tags/doe">DOE</a><span class="pur_comma">, </span><a href="/tags/edison-electric-institute">Edison Electric Institute</a><span class="pur_comma">, </span><a href="/tags/edison-international">Edison International</a><span class="pur_comma">, </span><a href="/tags/environmental-protection-agency">Environmental Protection Agency</a><span class="pur_comma">, </span><a href="/tags/epa">EPA</a><span class="pur_comma">, </span><a href="/tags/epa-administrator-lisa-jackson">EPA Administrator Lisa Jackson</a><span class="pur_comma">, </span><a href="/tags/james-inhofe-0">James Inhofe</a><span class="pur_comma">, </span><a href="/tags/james-rogers">James Rogers</a><span class="pur_comma">, </span><a href="/tags/john-bryson">John Bryson</a><span class="pur_comma">, </span><a href="/tags/kay-bailey-hutchison">Kay Bailey Hutchison</a><span class="pur_comma">, </span><a href="/tags/lisa-jackson">Lisa Jackson</a><span class="pur_comma">, </span><a href="/tags/michael-morris">Michael Morris</a><span class="pur_comma">, </span><a href="/tags/mountaineer">Mountaineer</a><span class="pur_comma">, </span><a href="/tags/national-oceanic-and-atmospheric-administration">National Oceanic and Atmospheric Administration</a><span class="pur_comma">, </span><a href="/tags/national-resources-defense-council">National Resources Defense Council</a><span class="pur_comma">, </span><a href="/tags/new-haven">New Haven</a><span class="pur_comma">, </span><a href="/tags/noaa">NOAA</a><span class="pur_comma">, </span><a href="/tags/nrdc">NRDC</a><span class="pur_comma">, </span><a href="/tags/president-obama">President Obama</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/us-supreme-court">U.S. Supreme Court</a> </div>
</div>
Mon, 01 Aug 2011 04:00:00 +0000puradmin13521 at http://www.fortnightly.comVendor Neutralhttp://www.fortnightly.com/fortnightly/2011/06/vendor-neutral
<div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Vendor Neutral</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - June 2011</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1106-VENpic1.jpg" width="1200" height="800" alt="ABB is investing $90 million to build a new high-voltage cable factory in Huntersville, N.C." title="ABB is investing $90 million to build a new high-voltage cable factory in Huntersville, N.C." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1106-VENpic2.jpg" width="640" height="425" alt="Survalent Technology commissioned a new SCADA system for the Golden Spread Electric Cooperative Antelope Station. Antelope Station is a gas-fired power plant with 18 9-MW gensets capable of generating about 170 MW, allowing the plant to quickly respond to regional capacity requirements.The SCADA system includes Survalent’s open system applications." title="Survalent Technology commissioned a new SCADA system for the Golden Spread Electric Cooperative Antelope Station. Antelope Station is a gas-fired power plant with 18 9-MW gensets capable of generating about 170 MW, allowing the plant to quickly respond to regional capacity requirements.The SCADA system includes Survalent’s open system applications." /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1106-VENpic3.jpg" width="1008" height="692" alt="Dynamic Solar completed a 250-kW solar system in Philadelphia, Pa., for the Philadelphia Water Department. Dynamic Solar teamed with CETCO Contracting Services and Nucero Electric to design, engineer and install the 250-kW ground mounted system. The array is located at the Southeast Water Pollution Control Plant and is expected to generate approximately 330,000 kWh of solar electricity per year." title="Dynamic Solar completed a 250-kW solar system in Philadelphia, Pa., for the Philadelphia Water Department. Dynamic Solar teamed with CETCO Contracting Services and Nucero Electric to design, engineer and install the 250-kW ground mounted system. The array is located at the Southeast Water Pollution Control Plant and is expected to generate approximately 330,000 kWh of solar electricity per year." /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/1105-VENpic4.jpg" width="730" height="547" alt="Chevron Mining Inc. recently began operating a 1-MW concentrating solar photovoltaic (CPV) power plant at the tailing site of its molybdenum mine in Questa, N.M. The 20-acre facility includes 172 solar trackers. Kit Carson Electric Cooperative is buying the output under a power purchase agreement." title="Chevron Mining Inc. recently began operating a 1-MW concentrating solar photovoltaic (CPV) power plant at the tailing site of its molybdenum mine in Questa, N.M. The 20-acre facility includes 172 solar trackers. Kit Carson Electric Cooperative is buying the output under a power purchase agreement." /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/1105-VENpic5.jpg" width="922" height="1143" alt="Caithness Energy and GE Energy Financial Services sold part of the 845-MW Shepherds Flat wind project to Google, ITOCHU and Sumitomo." title="Caithness Energy and GE Energy Financial Services sold part of the 845-MW Shepherds Flat wind project to Google, ITOCHU and Sumitomo." /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><h4>T&amp;D</h4>
<p><span class="boldred">ABB</span> broke ground for a new high-voltage cable factory in Huntersville, N.C. The new facility, located at the Commerce Station Business Park, will supply high-voltage and extra high-voltage transmission cables to carry electric power underground. ABB says the factory will produce “smart grid-compliant cables,” for use in both AC and DC applications. ABB is investing approximately $90 million in the new manufacturing facility, which is the newest addition to Charlotte’s Energy Hub economic development initiative.</p>
<p><span class="boldred">ABB</span> launched its latest generation 245-kV ELK-14 series of gas insulated switchgear (GIS). ABB says the footprint of this latest GIS product is 40 percent smaller than conventional designs and it uses 20 percent less SF6 gas compared to the previous generation, making it more environmentally friendly. The unit can be delivered as an assembled bay, fully tested and mounted on a frame, which ABB says reduces installation time. Control and protection equipment installed in the control cubicle directly at the bay also is intended to enable smart grid integration. The systems were designed for a rated voltage of 253 kV, with a maximum current rating of 3,150 amps.</p>
<p><span class="boldred">Duke Energy</span> and <span class="boldred">American Transmission Co.</span> (ATC) created the Duke-American Transmission Co. (DATC), a joint venture that will build, own and operate new electric transmission infrastructure in North America. The joint venture will operate as a transmission utility. As a result, it will be subject to the rules and regulations of the Federal Energy Regulatory Commission, MISO, PJM and various other independent system (grid) operators, as well as any states in which DATC develops projects. Per the structure of their new joint venture, Duke Energy and ATC may continue to develop transmission projects independently. DATC will own all of the transmission assets it builds and operates. Equity ownership of DATC will be split equally between Duke Energy and ATC.</p>
<p><span class="boldred">Tres Amigas</span> awarded a $200 million contract to <span class="boldred">Alstom Grid</span> to deliver high-voltage direct-current (HVDC) converter and automation technology for the first stage of the Tres Amigas SuperStation project in New Mexico. The project aims to interconnect America’s three primary electricity grids, the Eastern (Southwest Power Pool), Western (Western Electricity Coordinating Council) and Texas (Electric Reliability Council of Texas) networks. Under the contract, Alstom Grid will supply a 750-MW, 345-kV DC converter scheme. Engineering design for the transmission interconnection is underway, with construction scheduled to commence by 2012, and commercial operations expected in 2014.</p>
<h4>Environmental</h4>
<p><span class="boldred">American Electric Power</span> (AEP) installed <span class="boldred">GE</span>’s ABMet wastewater bioreactor system at the utility’s Mountaineer coal-fueled power plant in New Haven, W.Va. The proprietary biological treatment system uses a special molasses-based product as a nutrient for microbes that reduce selenium, a constituent found in many coal-fired power plant water emissions. GE’s ABMet technology utilizes special strains of common, non-pathogenic microbes that facilitate conversion of soluble selenium into elemental selenium, which is removed from the system during periodic backwashing. The microbes, which are fed the molasses-based nutrient, are seeded in a bed of activated carbon that acts as a growth medium for the microbes to create a biofilm. Selenium-laden wastewater passes through this bioreactor and a reduction reaction occurs. Other than the addition of the nutrient, GE says the system will be self-sustaining once it’s established. Selenium is an element found in coal that is not consumed in the combustion process and typically can be found in several of a plant’s post-combustion waste streams. AEP is installing GE’s system to allow its 1,300-MW Mountaineer generating station to comply with a new discharge limit for selenium. Construction of AEP’s treatment facility began in July 2010. The system is scheduled to become operational by the end of 2011.</p>
<p><span class="boldred">TÜV SÜD America</span> announced that the <span class="boldred">Massachusetts Department of Environmental Protection</span> (MassDEP) approved the Massachusetts-based company as a verification body to provide verification services for the Massachusetts Greenhouse Gas (GHG) Reporting Program. The Global Warming Solutions Act (GWSA) required MassDEP to promulgate mandatory GHG reporting regulations.</p>
<h4>Smart Grid</h4>
<p><span class="boldred">ABB</span> won orders from <span class="boldred">CenterPoint Energy</span> for the latest Service Suite mobile workforce management software from Ventyx and for the FocalPoint business intelligence solution from ABB’s latest acquisition, Obvient. These will be integrated into CenterPoint’s advanced distribution automation system, based on ABB’s Network Manager distribution management system (DMS).</p>
<p>The governing board of the public-private <span class="boldred">Smart Grid Interoperability Panel</span> (SGIP) voted in favor of a new smart grid standard and a set of guidelines. The documents address the need for wireless communications among grid-connected devices, as well as the ability to upgrade household electricity meters as the smart grid evolves. The SGIP identified “Guidelines for Assessing Wireless Communications for Smart Grid Applications” and “Meter Upgradeability Standard” as critical needs for realizing a modern power grid.</p>
<h4>Generation</h4>
<p><span class="boldred">Survalent Technology</span> commissioned a new SCADA system for the Golden Spread Electric Cooperative Antelope Station. Antelope Station is a gas-fired power plant with 18 9-MW gensets capable of generating about 170 MW, allowing the plant to quickly respond to regional capacity requirements.The SCADA system includes Survalent’s open system applications.</p>
<p><span class="boldred">Dynamic Solar</span> completed a 250-kW solar system in Philadelphia, Pa., for the Philadelphia Water Department. Dynamic Solar teamed with CETCO Contracting Services and Nucero Electric to design, engineer and install the 250-kW ground mounted system. The array is located at the Southeast Water Pollution Control Plant and is expected to generate approximately 330,000 kWh of solar electricity per year.</p>
<p><span class="boldred">Chevron Mining Inc.</span> recently began operating a 1-MW concentrating solar photovoltaic (CPV) power plant at the tailing site of its molybdenum mine in Questa, N.M. The 20-acre facility includes 172 solar trackers. Kit Carson Electric Cooperative is buying the output under a power purchase agreement.</p>
<p><span class="boldred">Dominion Virginia Power</span> is planning to convert three 63-MW power stations from using coal to biomass. The power stations in Altavista, Hopewell and Southampton County are identical and went into operation in 1992, providing peaking power supplies. When converted, they would generate 50 MW each, but operate as a base-load resource. The facilities will be fueled with logging waste. Pending approvals from the Virginia Department of Environmental Quality and the Virginia State Corporation Commission, the facilities could begin burning biomass in 2013.</p>
<p><span class="boldred">NextEra Energy Resources</span> entered a power purchase agreement with <span class="boldred">Google Energy</span> to purchase 100.8 MW of capacity from NextEra Energy Resources’ Minco II Wind Energy Center, currently under development in Grady and Caddo counties in Oklahoma. The project is comprised of 63 GE 1.6-MW wind turbines and is expected to be operational by the end of 2011. This is the second power purchase agreement for wind energy between the two companies. Google Energy also purchases 114 MW from NextEra Energy Resources’ Story II Wind Energy Center located in Story and Hardin counties in Iowa.</p>
<p><span class="boldred">Fotowatio Renewable Ventures</span> (FRV) closed financing and began construction on the 30-MW Webberville solar project, one of the largest solar PV systems in the United States. The project, located near Austin, Texas, is scheduled to be operational by year-end. <span class="boldred">Renewable Energy Systems Americas</span> (RES Americas) was selected to construct the project and provide operations and maintenance services for five years. Austin Energy will buy the plant’s output under a 25-year power purchase agreement. FRV partnered with Bayerische Landesbank (BayernLB), which underwrote the project construction debt. The project will use crystalline 270-Watt photovoltaic modules from Trina Solar.</p>
<p><span class="boldred">The Solar Electric Power Association</span> (SEPA) announced five utility groups have joined SEPA: American Municipal Power (AMP); City of Lake Worth, Fla.; Central Hudson Gas &amp; Electric (CH Energy Group); Greenwood Utilities Commission; South Mississippi Electric Power Association. SEPA says its utility membership now represents more than 95 percent of the nation’s installed solar capacity and 47 percent of all U.S. electric customers.</p>
<p><span class="boldred">Solar Power Partners</span> (SPP) and <span class="boldred">JCM Capital</span> have signed an agreement with <span class="boldred">Solar Power Network</span> (SPN), to provide full project financing for up to 20 MW of commercial-scale rooftop installations to be located throughout southwestern Ontario. The agreement follows the recent Solar Power Partners and JCM Capital announcement on the launch of their fund to develop, finance, own, and operate 200 MW of solar projects in Ontario. The SPN contract brings the current fund volume to 50 MW. SPP and JCM have already initiated 20 MW of projects that will start construction in 2011. The fund focuses on the installation of solar projects on large commercial and industrial buildings across Ontario, using the province’s feed-in-tariff program via solar PPAs with the Ontario Power Authority.</p>
<p><span class="boldred">Boeing</span> and <span class="boldred">South Carolina Electric &amp; Gas</span> (SCE&amp;G) created an energy partnership that will enable Boeing South Carolina to operate as a 100 percent renewable energy site. Renewable energy will be generated at the North Charleston site in part with thin-film solar laminate panels owned, installed and maintained by SCE&amp;G on the new Boeing 787 Final Assembly building roof. Under the arrangement, SCE&amp;G will install the solar generation system and dedicate the power from the system to the Boeing site. SCE&amp;G will then supplement the solar generated energy with power from its system resources, coupled with renewable energy certificates from its renewable generating facility, to meet all of Boeing’s energy requirements.</p>
<p><span class="boldred">Constellation Energy</span> and <span class="boldred">Holyoke Gas &amp; Electric Department (HG&amp;E)</span> are developing a new 4.5-MW solar installation that will generate electricity for Holyoke. Constellation Energy will build, own and maintain the system, and HG&amp;E will purchase the output under a 20-year PPA at a fixed cost that Constellation says is less than projected market rates. HG&amp;E’s solar power system will include 18,400 SolarWorld photovoltaic ground-mounted panels at two locations. The system is scheduled for commercial operation in summer 2011.</p>
<p><span class="boldred">Hartz Solar Hamilton</span>, a wholly-owned subsidiary of Hartz Mountain Industries, selected <span class="boldred">RMT Inc.</span> to design and construct its Hamilton solar project. The facility, nominally rated at 7.5 MW AC, is located in Hamilton Township, Mercer County, N.J. RMT says it will begin construction in June, with commissioning in November. RMT is responsible for engineering, procurement, and construction (EPC) of the foundations and racking systems, the PV modules, the DC and AC collector systems, the SCADA system, and testing and commissioning. The project will involve installation of more than 30,000 Suntech 280-Watt crystalline PV modules.</p>
<p><span class="boldred">The California Public Utilities Commission</span> (CPUC) approved <span class="boldred">Pacific Gas &amp; Electric</span>’s 20-year contract to purchase 150 MW of solar power from <span class="boldred">Sempra Generation</span>’s Mesquite Solar 1 PV power facility in Arizona. Mesquite Solar 1 is the first phase of Sempra Generation’s planned 700-MW Mesquite Solar complex located 40 miles west of Phoenix. With approval of the contract secured, the company plans to begin construction in June.</p>
<p><span class="boldred">San Diego Gas &amp; Electric (SDG&amp;E)</span> and subsidiaries of <span class="boldred">Soitec Solar Development</span> signed three contracts with a combined capacity of 30 MW of solar energy. The electricity will be generated at three solar power plant sites in San Diego County that will use Soitec CPV modules to be manufactured in a new factory being built in the San Diego area. The contracts require approval from the California Public Utilities Commission.</p>
<p><span class="boldred">San Diego Gas &amp; Electric (SDG&amp;E)</span> entered a 20-year contract for up to 156 MW of power supplied from the first phase of Sempra Generation’s Energía Sierra Juárez wind project in Baja California, Mexico. Both SDG&amp;E and Sempra Generation are subsidiaries of Sempra Energy. SDG&amp;E selected Energía Sierra Juárez as part of the utility’s 2009 competitive solicitation for renewable resources. The project was compared to other competitive bids, and the process was overseen by an independent evaluator, as required by the California Public Utilities Commission (CPUC). The contract is subject to approval by the CPUC and Federal Energy Regulatory Commission. Construction on Energía Sierra Juárez 1, about 70 miles east of San Diego and just south of the U.S.-Mexico border, is expected to begin in 2012.</p>
<p><span class="boldred">Ocean Power Technologies</span> (OPT) awarded four contracts to Oregon companies in connection with the manufacturing of its PB150 PowerBuoy wave energy generating device. The four companies receiving contracts are: American Bridge Manufacturing, Oregon Iron Works, Cascade General (a subsidiary of Vigor Industrial), and Sause Bros. Inc. After the initial PowerBuoy is deployed and tested off the coast of Reedsport, expected later this year, OPT plans to construct the first commercial-scale wave power station in the United States, consisting of up to nine additional PowerBuoys and grid connection infrastructure, subject to receipt of all necessary regulatory approvals and additional funding.</p>
<p><span class="boldred">Areva Solar</span> was awarded a major contract to install a 44-MW solar thermal augmentation project at a 750-MW coal-fired power station in Queensland, Australia. Areva says the project is the largest solar project in the Southern Hemisphere and the world’s largest solar power augmentation project at a coal-fired facility. Areva Solar will use its Australian-pioneered compact linear Fresnel reflector (CLFR) technology at CS Energy’s Kogan Creek Power Station. Construction is scheduled to begin in the first half of 2011, with commercial operation planned for 2013.</p>
<p><span class="boldred">Sempra Generation</span> entered a 20-year contract to sell 21 MW of wind energy to <span class="boldred">Maui Electric Company</span> from the Auwahi Wind project on the Ulupalakua Ranch in the southeastern region of Maui. The project is currently undergoing environmental review by Maui County, and state and federal agencies. Construction is expected to begin in early 2012.</p>
<h4>DR and Customer Systems</h4>
<p><span class="boldred">Baltimore Gas and Electric</span> (BGE) selected Opower’s Advanced Customer Engagement (ACE) platform as the front-end solution for its upcoming smart meter rollout. Opower’s ACE platform takes individual and neighborhood energy-usage data and transforms it into personalized reports that help customers understand their own energy usage more clearly. The reports also offer advice on ways to reduce energy use, helping customers lower their gas and electricity bills.</p>
<p><span class="boldred">Con Edison</span> added Apogee’s online tools to its website, <a href="http://www.conEd.com">www.conEd.com</a>, as part of its “The Power of Green” campaign, to help customers evaluate their energy use and find ways to save on their energy costs. The Energy Toolkit provides answers to energy questions; the HomeEnergyCalculator analyzes the customer’s energy use and makes recommendations for savings; and specialized calculators allow customers to run what-if scenarios on the use of lighting, appliances, TVs, and thermostat settings.</p>
<p><span class="boldred">GreenHouse Holdings</span> announced a partnership with <span class="boldred">EnergyConnect</span>. Together, the companies will offer customers integrated energy management and automated demand response (auto-DR) services. Under the terms of the agreement, GreenHouse will offer its auto-DR services to EnergyConnect’s customers, and EnergyConnect will market its products to Greenhouse’s customer base.</p>
<p><span class="boldred">SavWatt USA</span> subsidiary <span class="boldred">Pro EcoSolutions</span> entered a non-exclusive agreement with <span class="boldred">Comverge</span> and <span class="boldred">Con Edison</span> to implement their targeted demand side management program, which offers incentives for upgrading to more energy efficient equipment. Pro EcoSolutions will work with New York City businesses to replace existing incandescent bulbs, subsidize the cost of lighting, and administer the installation. Con Edison will be paying Pro EcoSolutions 65 cents per Watt saved.</p>
<h4>Metering</h4>
<p><span class="boldred">Kansas City Board of Public Utilites</span> (KCBPU) selected <span class="boldred">Elster</span> for the utility’s smart grid deployment. KCBPU will implement Elster’s EnergyAxis to streamline business and operational processes. The municipal utility plans to deploy more than 69,000 of Elster’s smart electric meters and 55,000 Elster smart water meters over the next few years.</p>
<p><span class="boldred">Comision Federal de Electricidad</span> (CFE) selected <span class="boldred">Elster</span>’s EnergyAxis smart grid solution to power the utility’s first advanced metering infrastructure (AMI) project in Mexico City. The Mexican Secretaria de Energia (SENER) and CFE will use the EnergyAxis pilot as a benchmark for evaluating Elster’s technologies for potential future deployments. CFE has already deployed nine other EnergyAxis systems throughout 14 of Mexico’s 16 service areas.</p>
<p><span class="boldred">BC Hydro</span> awarded a $270 million contract to <span class="boldred">Itron</span> to supply smart metering and meter data management systems. Itron will provide its OpenWay smart meters, run over a multi-application communication network powered by Cisco.</p>
<h4>EVs and Storage</h4>
<p><span class="boldred">Duke Energy</span> plans to store electricity generated at its Notrees Windpower project in west Texas using an energy storage and power management system developed by Austin-based <span class="boldred">Xtreme Power</span>. Duke Energy will work with the Energy Reliability Council of Texas (ERCOT) to integrate the wind power and battery storage system into the state’s independent power grid. The Electric Power Research Institute (EPRI) will advise the project team, collect data and help assess the potential for broader adoption of energy storage solutions throughout the industry. Duke Energy is targeting an in-service date for the battery storage system by late 2012.</p>
<p><span class="boldred">Siemens Energy</span> was commissioned to install five multi-level electric vehicle (EV) charging stations to support Loudoun County, Va.’s new commuter park-and-ride lot in Scott Jenkins Memorial Park. Siemens multi-level charging stations are designed for public outdoor applications. The stations deliver Level II charging and Level I charging through two separate outputs, which can deliver energy simultaneously. Siemens’ EV charging stations will be equipped with connectivity via the ChargePoint Network, which allows access to all manufacturers of vehicle charging stations, provides station monitoring and driver support, and mobile apps for station status and charging notifications. The stations were scheduled to be installed at the Loudoun County park in May 2011.</p>
<p>The <span class="boldred">EA Technology Group</span> collaborated with <span class="boldred">Energetix Pnu Power</span> to market compressed air batteries worldwide. Headquartered close to Energetix Pnu Power in Capenhurst, U.K., EA Technology will use its network of offices in the United States, China, Middle East and Australia, together with 35 distribution partners, to develop sales of Pnu Power products in a range of power backup and uninterruptible power supply applications. These include utility switching, industrial processes and data centers.</p>
<p><span class="boldred">Newmark Energy Solutions</span> (NES) formed strategic relationships with <span class="boldred">UTC Power Corp.</span> (UTC), <span class="boldred">Newmark Knight Frank</span>, and <span class="boldred">Austin Energy Partners Solutions</span> (AEP) to market, deliver, maintain and warranty fuel cells to commercial real estate markets across the United States. NES distributes UTC Power stationary fuel-cell units in the United States, and plans to permit, design, finance, construct, and operate a fleet of UTC fuel cells, installing 20 MW of capacity each year. Under the strategic relationship with Newmark Energy Solutions, UTC will provide fuel-cell product and support, while Newmark brings commercial real estate resources and expertise. AEP is expected to provide risk management expertise.</p>
<h4>People</h4>
<p><span class="boldred">SightLogix</span> appointed <span class="boldred">Jack Tomarchio</span> to its board of directors. Tomarchio is a former deputy secretary for intelligence and analysis operations under Pres. George W. Bush. Before that Tomarchio practiced law with an expertise in national security issues. He recently retired as a colonel from the United States Army Reserve where his last assignment was with the United States Special Operations Command.</p>
<p><span class="boldred">Ross Malme</span> joined <span class="boldred">Skipping Stone</span> as a partner and member of the board of directors as an equity owner. Malme previously held executive-level roles with Schneider Electric’s demand response resource center, Enron Energy Services, Schlumberger and Chevron. Ross was also the founder and CEO of RETX, a demand response technology firm, which has since been acquired by Schneider Electric. He served as chairman of Peak Load Management Alliance (PLMA) and formed a global demand response initiative in conjunction with the International Energy Agency (IEA).</p>
<h4>M&amp;A</h4>
<p><span class="boldred">Google</span> and subsidiaries of <span class="boldred">ITOCHU</span> and <span class="boldred">Sumitomo</span> joined <span class="boldred">GE Energy Financial Services</span> and developer and managing member <span class="boldred">Caithness Energy</span> as owners of the 845-MW Shepherds Flat wind project under construction near Arlington, Ore. The three new participants are investing approximately $500 million in the $2 billion project. The Shepherds Flat wind project stretches across 30 square miles of Gilliam and Morrow Counties in north-central Oregon.</p>
<p><span class="boldred">Lincoln Renewable Energy</span><span class="boldred">(LRE) </span>closed a $41 million power sale and project finance deal with Macquarie Energy. As part of the deal, Macquarie will enter a long-term purchase agreement for power and renewable energy credits from LRE’s New Jersey Oak solar project, and Macquarie will provide construction financing and term debt. LRE will be the long-term owner of the facility. Quanta Services is building the plant and providing O&amp;M services under an EPC contract. The New Jersey Oak solar project is a 10-MW PV project to be constructed in Fairfield Township, Cumberland County. The project will consist of some 55,000 solar panels constructed on a 100-acre site and will connect to Atlantic City Electric’s distribution system when it’s completed late in 2011.</p>
<p><span class="boldred">Ioxus Inc</span>. received $21 million from Energy Technology Ventures, a GE-NRG Energy-ConocoPhillips joint venture; Northwater Capital through its Northwater Intellectual Property Fund; Aster Capital (representing Alstom, Schneider Electric and Rhodia); and return investor Braemar Energy Ventures. Ioxus will use this funding to develop its technology and expand sales, marketing and manufacturing to meet growing demand for ultracapacitors.</p>
<p><span class="boldred">Calico Energy Services</span> received financial backing from Point B Capital and engaged the services of Point B, a management consulting firm that specializes in strategic execution. The investment provides capital to accelerate the company’s growth, and will allow Calico to use Point B’s leadership and management consulting services.</p>
<p><span class="boldred">Nexamp</span> acquired <span class="boldred">SolVera Energy</span> as part of an initiative to grow its utility-scale and distributed renewable energy business. The company also formed into two new business units, Renewable Energy Solutions and Clean Energy Advisory Services, which is focused on energy efficiency consulting services for commercial and industrial customers.</p>
<p><span class="boldred">Pattern Energy</span> partnered with <span class="boldred">Samsung Renewable Energy</span> to acquire wind power projects in Ontario from Acciona and Boralex. These projects will be combined with Pattern and Samsung’s larger South Kent Wind Farm, which is under development. The 270 MW wind farm is located in the Regional Municipality of Chatham-Kent. Samsung and its partners have an agreement with the Province of Ontario to provide 2,500 MW of new renewable energy. The first phase involves 400 MW of wind power and 100 MW of solar power. The companies secured dedicated transmission capacity for these initial projects. Pattern and Samsung agreed to develop more than 500 MW of wind power using Ontario-made wind turbine components from the new factories in Tillsonburg and in Windsor.</p>
<p><span class="boldred">Pattern and Samsung</span> recently announced the acquisition of land from the Fargo Wind Project from <span class="boldred">Suncor Energy</span> and a nearby wind project development from <span class="boldred">Northland Power</span>.</p>
<p><span class="boldred">DeWind Co</span>, a wholly owned subsidiary of <span class="boldred">Daewoo Shipbuilding and Marine Engineering</span>, acquired the rights for the 20-MW Frisco wind project, located in the northern-most portion of Hansford County, Texas, from local developer Distributed Wind Systems. DeWind will install 10 of its 2-MW D8.2 wind turbines at the Frisco site, which is scheduled to be in commercial operation by the end of 2011. The D8.2 turbines will be furnished from DeWind assembly contractor TECO-Westinghouse located in Round Rock, Texas.</p>
<p><span class="boldred">PPL</span> completed its acquisition of the <span class="boldred">Central Networks</span> electricity distribution business, the second-largest such business in the United Kingdom. PPL, through a U.K. subsidiary, acquired Central Networks from E.ON UK plc for $5.7 billion in cash, inclusive of certain permitted pre-closing adjustments, and $800 million of existing public debt to be assumed through consolidation. To complete closing, PPL used acquisition financing under a syndicated bridge facility arranged by Bank of America Merrill Lynch and Credit Suisse. The permanent financing plan includes a combination of common stock, equity units and debt. PPL expects to complete the permanent equity financing in the second quarter of 2011 and the debt financing by the end of the year.</p>
<p>The boards of directors of <span class="boldred">Exelon</span> and <span class="boldred">Constellation Energy</span> agreed to combine the two companies in a stock-for-stock transaction. Under the terms of the transaction, Constellation investors would receive the equivalent of $38.59 a share, about an 18-percent premium. The combined entity would have a market value of roughly $34 billion. The resulting company would retain the Exelon name and be headquartered in Chicago. Exelon’s power marketing business (Power Team) and Constellation’s retail and wholesale business would be consolidated under the Constellation brand and be headquartered in Baltimore. Both companies’ renewable energy businesses also would be headquartered in Baltimore, and the three utilities within the new Exelon—BGE, ComEd and PECO—would remain standalone organizations.</p>
<p> </p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/generation-markets">Generation &amp; Markets</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/td-grid">T&amp;D Grid</a></li><li class="taxonomy-term-reference-2"><a href="/article-categories/finance">Finance</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/vendor-neutral">Vendor Neutral</a></li></ul></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/abb">ABB</a><span class="pur_comma">, </span><a href="/tags/abmet">ABMet</a><span class="pur_comma">, </span><a href="/tags/acciona">Acciona</a><span class="pur_comma">, </span><a href="/tags/aep">AEP</a><span class="pur_comma">, </span><a href="/tags/alstom">Alstom</a><span class="pur_comma">, </span><a href="/tags/alstom-grid">Alstom Grid</a><span class="pur_comma">, </span><a href="/tags/american-electric-power">American Electric Power</a><span class="pur_comma">, </span><a href="/tags/american-municipal-power">American Municipal Power</a><span class="pur_comma">, </span><a href="/tags/american-transmission">American Transmission</a><span class="pur_comma">, </span><a href="/tags/american-transmission-co">American Transmission Co.</a><span class="pur_comma">, </span><a href="/tags/ami">AMI</a><span class="pur_comma">, </span><a href="/tags/amp">AMP</a><span class="pur_comma">, </span><a href="/tags/apogee">Apogee</a><span class="pur_comma">, </span><a href="/tags/areva">Areva</a><span class="pur_comma">, </span><a href="/tags/atc">ATC</a><span class="pur_comma">, </span><a href="/tags/austin-energy">Austin Energy</a><span class="pur_comma">, </span><a href="/tags/austin-energy-partners-solutions">Austin Energy Partners Solutions</a><span class="pur_comma">, </span><a href="/tags/baltimore-gas-and-electric">Baltimore Gas and Electric</a><span class="pur_comma">, </span><a href="/tags/bank-america">Bank of America</a><span class="pur_comma">, </span><a href="/tags/bank-america-merrill-lynch">Bank of America Merrill Lynch</a><span class="pur_comma">, </span><a href="/tags/bayerische-landesbank">Bayerische Landesbank</a><span class="pur_comma">, </span><a href="/tags/bayernlb">BayernLB</a><span class="pur_comma">, </span><a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/bc-hydro">BC Hydro</a><span class="pur_comma">, </span><a href="/tags/bge">BGE</a><span class="pur_comma">, </span><a href="/tags/boeing">Boeing</a><span class="pur_comma">, </span><a href="/tags/caithness">Caithness</a><span class="pur_comma">, </span><a href="/tags/caithness-energy">Caithness Energy</a><span class="pur_comma">, </span><a href="/tags/calico-energy-services">Calico Energy Services</a><span class="pur_comma">, </span><a href="/tags/california-public-utilities-commission">California Public Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/centerpoint-energy-0">CenterPoint Energy</a><span class="pur_comma">, </span><a href="/tags/central-networks">Central Networks</a><span class="pur_comma">, </span><a href="/tags/cfe">CFE</a><span class="pur_comma">, </span><a href="/tags/ch-energy-group">CH Energy Group</a><span class="pur_comma">, </span><a href="/tags/chargepoint">ChargePoint</a><span class="pur_comma">, </span><a href="/tags/chevron">Chevron</a><span class="pur_comma">, </span><a href="/tags/china">China</a><span class="pur_comma">, </span><a href="/tags/cisco">Cisco</a><span class="pur_comma">, </span><a href="/tags/city-lake-worth">City of Lake Worth</a><span class="pur_comma">, </span><a href="/tags/comed">ComEd</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/communication">Communication</a><span class="pur_comma">, </span><a href="/tags/comverge">Comverge</a><span class="pur_comma">, </span><a href="/tags/con-edison">Con Edison</a><span class="pur_comma">, </span><a href="/tags/constellat">Constellat</a><span class="pur_comma">, </span><a href="/tags/constellation">Constellation</a><span class="pur_comma">, </span><a href="/tags/constellation-energy">Constellation Energy</a><span class="pur_comma">, </span><a href="/tags/cpuc">CPUC</a><span class="pur_comma">, </span><a href="/tags/cpv">CPV</a><span class="pur_comma">, </span><a href="/tags/credit-suisse">Credit Suisse</a><span class="pur_comma">, </span><a href="/tags/daewoo">Daewoo</a><span class="pur_comma">, </span><a href="/tags/daewoo-shipbuilding-and-marine-engineering">Daewoo Shipbuilding and Marine Engineering</a><span class="pur_comma">, </span><a href="/tags/datc">DATC</a><span class="pur_comma">, </span><a href="/tags/dc">DC</a><span class="pur_comma">, </span><a href="/tags/dewind">DeWind</a><span class="pur_comma">, </span><a href="/tags/dg">DG</a><span class="pur_comma">, </span><a href="/tags/distributed-wind-systems">Distributed Wind Systems</a><span class="pur_comma">, </span><a href="/tags/dms">DMS</a><span class="pur_comma">, </span><a href="/tags/dominion">Dominion</a><span class="pur_comma">, </span><a href="/tags/dominion-virginia-power">Dominion Virginia Power</a><span class="pur_comma">, </span><a href="/tags/dr">DR</a><span class="pur_comma">, </span><a href="/tags/duke-energy">Duke Energy</a><span class="pur_comma">, </span><a href="/tags/duke-american-transmission-co">Duke-American Transmission Co</a><span class="pur_comma">, </span><a href="/tags/ea-technology-group">EA Technology Group</a><span class="pur_comma">, </span><a href="/tags/electric-power-research">Electric Power Research</a><span class="pur_comma">, </span><a href="/tags/electric-power-research-institute">Electric Power Research Institute</a><span class="pur_comma">, </span><a href="/tags/electric-power-research-institute-epri">Electric Power Research Institute (EPRI)</a><span class="pur_comma">, </span><a href="/tags/electric-reliability-council-texas">Electric Reliability Council of Texas</a><span class="pur_comma">, </span><a href="/tags/elster">Elster</a><span class="pur_comma">, </span><a href="/tags/energetix-pnu-power">Energetix Pnu Power</a><span class="pur_comma">, </span><a href="/tags/energyaxis-0">EnergyAxis</a><span class="pur_comma">, </span><a href="/tags/epa">EPA</a><span class="pur_comma">, </span><a href="/tags/epc">EPC</a><span class="pur_comma">, </span><a href="/tags/epri">EPRI</a><span class="pur_comma">, </span><a href="/tags/ercot">ERCOT</a><span class="pur_comma">, </span><a href="/tags/etc">ETC</a><span class="pur_comma">, </span><a href="/tags/ev">EV</a><span class="pur_comma">, </span><a href="/tags/evs">EVs</a><span class="pur_comma">, </span><a href="/tags/exelon">Exelon</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission">Federal Energy Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/fotowatio-renewable-ventures">Fotowatio Renewable Ventures</a><span class="pur_comma">, </span><a href="/tags/frisco">Frisco</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/ge-energy-financial">GE Energy Financial</a><span class="pur_comma">, </span><a href="/tags/ge-energy-financial-services">GE Energy Financial Services</a><span class="pur_comma">, </span><a href="/tags/george-w-bush">George W. Bush</a><span class="pur_comma">, </span><a href="/tags/ghg">GHG</a><span class="pur_comma">, </span><a href="/tags/gis">GIS</a><span class="pur_comma">, </span><a href="/tags/global-warming-solutions-act">Global Warming Solutions Act</a><span class="pur_comma">, </span><a href="/tags/google">Google</a><span class="pur_comma">, </span><a href="/tags/google-energy">Google Energy</a><span class="pur_comma">, </span><a href="/tags/greenhouse-holdings">GreenHouse Holdings</a><span class="pur_comma">, </span><a href="/tags/greenwood-utilities-commission">Greenwood Utilities Commission</a><span class="pur_comma">, </span><a href="/tags/gwsa">GWSA</a><span class="pur_comma">, </span><a href="/tags/hartz-solar-hamilton">Hartz Solar Hamilton</a><span class="pur_comma">, </span><a href="/tags/hvdc">HVDC</a><span class="pur_comma">, </span><a href="/tags/hydro">Hydro</a><span class="pur_comma">, </span><a href="/tags/iea">IEA</a><span class="pur_comma">, </span><a href="/tags/international-energy-agency">International Energy Agency</a><span class="pur_comma">, </span><a href="/tags/interoperability">Interoperability</a><span class="pur_comma">, </span><a href="/tags/ioxus-inc">Ioxus Inc</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/it">IT</a><span class="pur_comma">, </span><a href="/tags/itochu">ITOCHU</a><span class="pur_comma">, </span><a href="/tags/itron">Itron</a><span class="pur_comma">, </span><a href="/tags/jack-tomarchio">Jack Tomarchio</a><span class="pur_comma">, </span><a href="/tags/jcm-capital">JCM Capital</a><span class="pur_comma">, </span><a href="/tags/lincoln-renewable-energy">Lincoln Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/macquarie-energy">Macquarie Energy</a><span class="pur_comma">, </span><a href="/tags/massachusetts-department-environmental-protection">Massachusetts Department of Environmental Protection</a><span class="pur_comma">, </span><a href="/tags/massachusetts-greenhouse-gas">Massachusetts Greenhouse Gas</a><span class="pur_comma">, </span><a href="/tags/massdep">MassDEP</a><span class="pur_comma">, </span><a href="/tags/maui-electric-co">Maui Electric Co</a><span class="pur_comma">, </span><a href="/tags/maui-electric-company">Maui Electric Company</a><span class="pur_comma">, </span><a href="/tags/merrill-lynch">Merrill Lynch</a><span class="pur_comma">, </span><a href="/tags/mesquite">Mesquite</a><span class="pur_comma">, </span><a href="/tags/mesquite-solar-1">Mesquite Solar 1</a><span class="pur_comma">, </span><a href="/tags/miso">MISO</a><span class="pur_comma">, </span><a href="/tags/mountaineer">Mountaineer</a><span class="pur_comma">, </span><a href="/tags/network">Network</a><span class="pur_comma">, </span><a href="/tags/new-haven">New Haven</a><span class="pur_comma">, </span><a href="/tags/new-jersey">New Jersey</a><span class="pur_comma">, </span><a href="/tags/newmark-knight-frank">Newmark Knight Frank</a><span class="pur_comma">, </span><a href="/tags/nexamp">Nexamp</a><span class="pur_comma">, </span><a href="/tags/nextera">NextEra</a><span class="pur_comma">, </span><a href="/tags/nextera-energy">NextEra Energy</a><span class="pur_comma">, </span><a href="/tags/nextera-energy-resources">NextEra Energy Resources</a><span class="pur_comma">, </span><a href="/tags/notrees-windpower">Notrees Windpower</a><span class="pur_comma">, </span><a href="/tags/nrg">NRG</a><span class="pur_comma">, </span><a href="/tags/nrg-energy">NRG Energy</a><span class="pur_comma">, </span><a href="/tags/ocean-power-technologies">Ocean Power Technologies</a><span class="pur_comma">, </span><a href="/tags/openway">OpenWay</a><span class="pur_comma">, </span><a href="/tags/opower">Opower</a><span class="pur_comma">, </span><a href="/tags/opt">OPT</a><span class="pur_comma">, </span><a href="/tags/ot">OT</a><span class="pur_comma">, </span><a href="/tags/pattern-energy">Pattern Energy</a><span class="pur_comma">, </span><a href="/tags/peco">PECO</a><span class="pur_comma">, </span><a href="/tags/pjm">PJM</a><span class="pur_comma">, </span><a href="/tags/pollution">Pollution</a><span class="pur_comma">, </span><a href="/tags/ppa">PPA</a><span class="pur_comma">, </span><a href="/tags/ppl">PPL</a><span class="pur_comma">, </span><a href="/tags/pv">PV</a><span class="pur_comma">, </span><a href="/tags/pv-systems">PV systems</a><span class="pur_comma">, </span><a href="/tags/quanta-services">Quanta Services</a><span class="pur_comma">, </span><a href="/tags/reliability">Reliability</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/renewable-energy">Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/renewable-energy-systems-americas">Renewable Energy Systems Americas</a><span class="pur_comma">, </span><a href="/tags/res">RES</a><span class="pur_comma">, </span><a href="/tags/res-americas">RES Americas</a><span class="pur_comma">, </span><a href="/tags/rmt-inc">RMT Inc.</a><span class="pur_comma">, </span><a href="/tags/ross-malme">Ross Malme</a><span class="pur_comma">, </span><a href="/tags/samsung-renewable-energy">Samsung Renewable Energy</a><span class="pur_comma">, </span><a href="/tags/san-diego-county">San Diego County</a><span class="pur_comma">, </span><a href="/tags/savwatt-usa">SavWatt USA</a><span class="pur_comma">, </span><a href="/tags/scada">SCADA</a><span class="pur_comma">, </span><a href="/tags/sce">SCE</a><span class="pur_comma">, </span><a href="/tags/schneider">Schneider</a><span class="pur_comma">, </span><a href="/tags/sempra">Sempra</a><span class="pur_comma">, </span><a href="/tags/sempra-energy">Sempra Energy</a><span class="pur_comma">, </span><a href="/tags/sempra-generation">Sempra Generation</a><span class="pur_comma">, </span><a href="/tags/sep">SEP</a><span class="pur_comma">, </span><a href="/tags/sepa">SEPA</a><span class="pur_comma">, </span><a href="/tags/sgip">SGIP</a><span class="pur_comma">, </span><a href="/tags/shepherds-flat">Shepherds Flat</a><span class="pur_comma">, </span><a href="/tags/siemens">Siemens</a><span class="pur_comma">, </span><a href="/tags/siemens-energy">Siemens Energy</a><span class="pur_comma">, </span><a href="/tags/sightlogix">SightLogix</a><span class="pur_comma">, </span><a href="/tags/skipping-stone">Skipping Stone</a><span class="pur_comma">, </span><a href="/tags/smart-grid-interoperability-panel">Smart Grid Interoperability Panel</a><span class="pur_comma">, </span><a href="/tags/soitec-solar-development">Soitec Solar Development</a><span class="pur_comma">, </span><a href="/tags/solar">Solar</a><span class="pur_comma">, </span><a href="/tags/solar-electric-power-association">Solar Electric Power Association</a><span class="pur_comma">, </span><a href="/tags/solar-panels">solar panels</a><span class="pur_comma">, </span><a href="/tags/solar-power-partners">Solar Power Partners</a><span class="pur_comma">, </span><a href="/tags/south-mississippi-electric-power">South Mississippi Electric Power</a><span class="pur_comma">, </span><a href="/tags/southwest-power-pool">Southwest Power Pool</a><span class="pur_comma">, </span><a href="/tags/spp">SPP</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/sumitomo">Sumitomo</a><span class="pur_comma">, </span><a href="/tags/survalent-technology">Survalent Technology</a><span class="pur_comma">, </span><a href="/tags/technology">Technology</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a><span class="pur_comma">, </span><a href="/tags/tres-amigas">Tres Amigas</a><span class="pur_comma">, </span><a href="/tags/trina-solar">Trina Solar</a><span class="pur_comma">, </span><a href="/tags/utc-power">UTC Power</a><span class="pur_comma">, </span><a href="/tags/utc-power-corp">UTC Power Corp</a><span class="pur_comma">, </span><a href="/tags/webberville">Webberville</a><span class="pur_comma">, </span><a href="/tags/western-electricity-coordinating-council">Western Electricity Coordinating Council</a><span class="pur_comma">, </span><a href="/tags/wind">Wind</a><span class="pur_comma">, </span><a href="/tags/xtreme-power">Xtreme Power</a> </div>
</div>
Wed, 01 Jun 2011 04:00:00 +0000puradmin14100 at http://www.fortnightly.comRenewables at a Crossroadshttp://www.fortnightly.com/fortnightly/2011/06/renewables-crossroads
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Investment opportunities in an evolving environment.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Christopher Dann, Sartaz Ahmed and Owen Ward</p>
</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Christopher Dann</b> is a partner with Booz &amp; Co. <b>Sartaz Ahmed</b> is a principal and <b>Owen Ward</b> is a senior associate with Booz &amp; Co.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - June 2011</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1106/images/1106-FEA2-fig1.jpg" width="1364" height="741" alt="" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/article_images/1106/images/1106-FEA2-fig2.jpg" width="1364" height="1137" alt="" /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1106/images/1106-FEA2-fig3.jpg" width="2060" height="989" alt="" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/article_images/1106/images/1106-FEA2-fig4.jpg" width="2064" height="1089" alt="" /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1106/images/1106-FEA2-fig5.jpg" width="1380" height="1089" alt="" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/article_images/1106/images/1106-FEA2-fig6.jpg" width="1368" height="1033" alt="" /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1106/images/1106-FEA2-fig7.jpg" width="1368" height="971" alt="" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>The global economic downturn has cast at least a measure of doubt on the business case for renewable energy technologies, leaving some industry observers to point to previous periods of renewables growth in questioning whether the market is resilient enough this time to withstand volatile energy prices and a shifting political climate.</p>
<p>Yet, despite this uncertainty, the market has evolved in important ways, setting the stage for it to maintain its economic viability and continue to grow. One of the hallmarks of the renewables sector today is its structural diversity in terms of the technologies, players, and geographic regions involved in its growth.</p>
<p>For that growth to continue, companies and investors participating in the sector will need to explicitly address uncertainty through effective risk management and contingency planning. In many cases, even those investments with promising near-term prospects will need to be evaluated on the basis of their ability to adapt to future fluctuations in demand. The relatively favorable investment climate of the past decade attracted a bevy of companies that lacked the expertise to build and sustain a competitive advantage. With industry consolidation now on the horizon, those that survive will be the ones that develop the strategic and operational capabilities required to capture value and manage regulatory and market risk.</p>
<p><b>Green Boom </b></p>
<p>Beginning in 2005, a number of diverse factors came together to accelerate the growth of new renewable energy generation in the United States (<i>see Figure 1</i>). Power prices jumped as natural gas prices reached a historical high, technology advances led to significant reductions in renewable energy costs, and the investment community began to invest in the sector in earnest.</p>
<p>But by far the biggest driver behind the growth of renewables during this time was meaningful policy support, at both the federal and state levels. With a focus on fighting climate change and jump-starting new industries, legislators adopted a wide range of incentive mechanisms to support the development and adoption of renewable energy technologies. These mechanisms included the renewable portfolio standard (RPS), renewable energy credit (REC), feed-in tariff (FIT), investment tax credit (ITC), and production tax credit (PTC), along with various cash grants.</p>
<p>More than 30 U.S. states have enacted renewable portfolio standards, which mandate the use of renewable power for a certain percentage of retail electricity sales and are largely seen as the most effective policy approach to supporting the growth of renewable energy. Though each state implements its own timing, targets, and compliance, most states start with moderate targets that, in some cases, reflect existing renewable generation capacities. However, in almost all cases, the targets for 2015 and beyond are well above 2005 levels, and as a result, they have stimulated much investment and planning. Wind power, the least expensive renewable power source, has been the dominant choice of most states to date, but technology-specific set-asides have also helped to stimulate investments in higher-cost solar and geothermal technologies.</p>
<p>Additionally, REC trading programs are now established in most states that have RPS obligations to provide electricity suppliers with flexibility in complying with the mandate. RECs are tied to generating units and can be sold along with or separately from the underlying power generation to third parties that, in turn, can redeem them with regulators to satisfy RPS requirements. These markets typically are state-specific, vary in their setup, and are still in their infancy. However, the arbitrage opportunities in the REC markets have been critical in attracting private-sector investors, as they have incentivized investors to bundle RECs acquired from single providers and sell them at a premium to companies that need to satisfy RPS obligations. Some states have also set REC prices for specific generation technologies (such as solar RECs, or SRECs) to help provide cash flow certainty to investors and secure financing (<i>see “New Jersey’s SREC Success”</i>).</p>
<p>Feed-in tariffs, which establish a guaranteed price for the generation output over a set period (typically 10 to 15 years), are also selectively employed by state and local governments as a way to encourage utilities and developers to invest in new renewable energy capacity. As with RPS mandates, FIT commitments vary significantly across states and tend to favor certain technologies. Consequently, in combination with regional wholesale power price variation, returns vary widely across technologies and states (<i>see Figure 2</i>).</p>
<p>Beyond state-level incentives, federal investment and production tax credits have been on-and-off components of American energy policy since well before 2005, subject to extensions by Congress. Despite uncertainty about their longevity, both programs have played a crucial role in the development of the renewables sector. ITCs have been favored by solar photovoltaic (PV) manufacturers and other industry participants considering investments with high capital costs (relative to recurring costs). PTCs effectively guarantee a fee in the form of a tax credit for every unit of electricity produced (<i>see Figure 3</i>). As such, they are a better fit for the wind energy industry, due to the technology’s lower up-front costs and greater potential to generate ongoing cash flows from producing power.</p>
<p>During the global economic downturn, participation in both programs was limited, because the tax credit benefits aren’t immediate and require reliable positive cash flows for offsetting the credits. However, this limitation—from the investors’ perspective—was addressed by the <i>American Recovery and Reinvestment Act</i> of 2009, which temporarily allowed cash grants in place of the tax credits. This change, which was recently extended for another year, helped stimulate solar PV investment in 2010. The Recovery Act also renewed the PTC program through the end of 2013 (2012 for wind), helping to further strengthen the business case for wind and biomass investments.</p>
<p>While these policies have worked in tandem to help increase demand for renewables and create a market, the sector has benefited on the supply side from scale and technology advancements, which have reduced the cost for a wide array of renewables technologies and made them more competitive with established generation options.</p>
<p>Of all renewables, solar PV has arguably benefited the most in the past couple of years from scale and technology advancements. Solar PV costs have decreased for both thin-film and crystalline silicon technology. Through a combination of technology advancements, assembly automation, and other advantages of scale, First Solar, for example, has driven significant reductions in one thin-film technology in particular—cadmium telluride (CdTe)—which witnessed a 74 percent reduction in module cost (more than $2 per watt) since 2004. This dramatic decline has made the less-efficient CdTe technology a viable large-scale solution for commercial and utility customers. At the same time, the more established crystalline silicon technology—preferred by residential customers with limited roof space—has benefited from advances in manufacturing processes and a shift in manufacturing capacity to lower-cost suppliers in China. These developments helped cut crystalline silicon module costs by 45 percent, or more than $1 per Watt, since 2008.</p>
<p>Though cost reductions have been less immediate and dramatic for other renewables technologies, the overall trend has been quite favorable. New wind installations, for instance, today enjoy a levelized cost of electricity (LCOE) net of tax credits that is roughly on par with supercritical coal and nuclear, even in the absence of a price on carbon emissions (<i>see Figure 4</i>).</p>
<p>Recognizing a favorable investment environment, private equity and venture capital firms committed increasing amounts of money to the renewables-heavy cleantech sector between 2006 and 2008, exceeding $10 billion at the peak in North America alone. These investors were assured that predictable revenue streams from policy mechanisms such as feed-in tariffs and long-term purchase agreements would help outweigh the technology risk. Investments were also influenced to some degree by a fear of missing out on the next big thing, creating a herd mentality in the market—at least before the global financial crisis hit.</p>
<p><b>Applying the Brakes </b></p>
<p>In the wake of the crisis, many of the underlying factors that converged to drive demand for renewables have faded, and others remain highly uncertain.</p>
<p>One of the key elements supporting the business case for renewables has been high power prices anchored to high natural gas prices. That dynamic has shifted, now that natural gas prices have retreated due to the economic slowdown and the development of unconventional gas resources; most analysts forecast that natural gas prices will remain below $6 to $7 per million British thermal units (MMBtu) for the foreseeable future. As such, renewables likely will face stiff competition from natural gas generation in markets without revenue-setting FITs.</p>
<p>The worsening economic conditions also have brought a shift in political priorities, favoring budgetary restraint over fresh spending on environmental issues, and some federal subsidies supporting renewables might be sacrificed as a result. The Democrat-controlled lame-duck Congress of December 2010 was able to secure a one-year extension to the ITC cash grant, but a Republican-dominated House of Representatives likely will be far less supportive of such fiscal expansions. While project developers might speed up their plans again this year, fearing a potential lapse of federal subsidies, renewables investment prospects would dampen if the cash grants or tax credits expire.</p>
<p>The same pattern could occur at the state and local levels, where support for long-term FIT and REC contracts could fall prey to state budget cuts. Even with projected system cost reductions, solar PV will continue to rely on significant public subsidies—nearly 100 percent of retail rates in 2013 (<i>see Figure 5</i>). In this environment, a domestic federal cap-and-trade regime, which would have put a price on carbon emissions and improved the competitiveness of renewables, is likely off the table for the foreseeable future.</p>
<p>Another potential headwind is the amount of wiggle room that states built into their RPS laws. State RPS policies remain key drivers for renewables, but there is sufficient flexibility in the requirements to dial back the mandates, meaning renewables capacity might fall well short of the stated goals. Most RPS policies have clauses allowing the requirements to be relaxed if the price impact on customers is deemed too severe. Seven states have explicitly capped incremental rate impacts at or below just 2 percent. Other states have limits on customer bill increases, <i>force majeure</i> mechanisms, or rigorous approval requirements for annual procurements. Furthermore, the rate impact caps are often vaguely worded, leaving regulators significant flexibility. For instance, they don’t always specify the time period for which the percentage increase threshold applies. There’s also the question of how strictly states will enforce financial penalties for noncompliance.</p>
<p>Beyond its impact on these specific drivers, the economic slowdown also has caused overall electricity demand to decline, resulting in overcapacity in most U.S. power markets. This demand destruction has slowed renewables development in the absence of FITs. Less consumption translates into lower power prices, which weaken the business case for renewables, and there is little reason to add new capacity when the market is oversupplied.</p>
<p><b>Too Broad to Fail </b></p>
<p>Some industry observers point to previous periods of renewables growth—such as the mid-1980s—in questioning whether anything has really changed to ensure the market’s resilience in the face of volatile energy prices and changing politics.</p>
<p>Yet, despite this uncertainty, the market has evolved and matured with greater structural diversity and strength, in terms of the technologies being deployed, the industry’s geographic footprint, and developers’ financial models.</p>
<p>The renewables sector is far more diversified today than it was in the early part of the 1980s, when non-hydro renewable generation was primarily reliant on biomass (<i>see Figure 1</i>). Biomass—both wood and waste—accounted for more than 70 percent of renewable installations through 2000. Though a convenient and economical source of power in areas like California and the Northeast, biomass demonstrated limited potential for either rapid technological improvements or large-scale capacity development. Meanwhile, wind and solar technologies were in their embryonic stage. Consequently, the political commitment to renewables as a viable alternative to fossil fuels was weak, particularly as the supply of oil and natural gas increased and prices fell.</p>
<p>Today, the renewable generation portfolio in the United States is much more balanced, thanks in large part to wind and solar, which have grown substantially over the last decade. Diversity extends beyond the high-level technology categories such as wind, biomass, and geothermal to the subsectors underpinning them. For instance, the proliferation of various solar technologies—both thermal and PV, and the even further subsets of thin-film and crystalline silicon—helps to ensure that product characteristics meet the targeted needs of different customers—for example, utility versus residential. This technological diversity carries a number of key benefits. For example, regions often have expanded flexibility to meet renewable generation goals by leveraging technology alternatives that were previously unavailable. Additionally, intermittent renewables technologies can complement one another to help smooth output variations and better match supply with demand. And proliferation of different technologies enhances intra-renewable competition, thereby stimulating innovation and encouraging conï¿½tinuous cost improvements.</p>
<p>To this last point, other opportunities might still exist to bring down the cost of renewables technologies and help them compete with traditional generation sources.</p>
<p>• <i>Wind:</i> Wind power, the most widespread renewables technology, has already benefited from $3 billion in R&amp;D spending over the past decade, and the technology might have reached the point of diminishing returns. Still, the slowdown has led to an estimated 30 percent overcapacity, which should lead to lower equipment cost and thus help sustain steady growth in wind installations.</p>
<p>• <i>Solar—CSP:</i> Concentrating solar power (CSP) is a mature but re-emerging renewables technology that exhibits strong growth potential for the next five years. CSP plants have been operating in California’s Mojave Desert for nearly 30 years, and despite the introduction of some new technologies (such as the power tower), most plants are expected to feature the mature parabolic trough technology. As such, most technological breakthroughs to bring down the cost have already occurred. Despite this, the technology might build enough momentum to scale up component manufacturing and reduce costs if CSP projects continue to perform well in places such as California and Spain, and if installations increase.</p>
<p>• <i>Solar—Crystalline Silicon:</i> Despite significant progress on the cost front in recent years, solar PV remains the highest-cost renewables technology and holds the greatest potential for further cost reductions. In crystalline silicon, there remain several levers for further reductions across the value chain, including consolidation, scale, and increased competition. Here, the impact of the rise of Chinese PV module manufacturers cannot be overstated. These manufacturers have increased their share of the market in the last four years to more than 50 percent. Today, the top 10 Chinese PV module manufacturers combined have six times the combined manufacturing capacity of the top 10 U.S. module manufacturers. Building on their strong position in the module segment, these companies will continue to integrate forward and backward, setting themselves up to deliver further cost reductions through both innovation and investments.</p>
<p>• <i>Solar—Thin Film:</i> Beyond pursuing scale economies, an array of thin-film competitors are testing alternative designs and materials that promise to reduce the technology’s cost per Watt or increase cell efficiencies. Though unlikely in the immediate future, a breakthrough development related to manufacturing costs, material costs, or cell efficiency could reduce costs on the order of First Solar’s experience with CdTe or that of the Chinese crystalline silicon module manufacturers.</p>
<p>• <i>Biomass: </i>Wood combustion, the predominant biomass generation technology, is well established and thus unlikely to experience a breakthrough that would reduce costs. The availability of moderately priced feedstock for a proven renewables technology option has attracted significant investment in potential new biomass wood projects. However, prospects for completion and sustained growth hinge on public support and regulatory treatment. Specifically, uncertainties over the carbon neutrality of burning wood, along with concerns about forest sustainability and health implications, have triggered national- and state-level debates about the technology’s eligibility for RPS compliance. The Environmental Protection Agency’s recent ruling to include biomass combustion in greenhouse gas permit requirements is at least a temporary setback for biomass wood’s prospects. As regulatory and political developments continue to hang over biomass wood’s future, attention might shift to less controversial technologies that convert waste to energy.</p>
<p>In addition to technological diversity, geographic diversity also plays an important role. Renewable generation is no longer confined to certain regions of the U.S., and its new geographic reach has positive implications for political support and implementation.</p>
<p>Six years ago, just two markets—the Western Electricity Coordinating Council (WECC) and SERC Reliability Corp. regions—accounted for more than 55 percent of the nation’s renewable generation capacity. The establishment of RPS mandates in more than 30 states has dropped their share to about 40 percent as other regions have grown at a faster clip. The markets of the Electric Reliability Council of Texas (ERCOT), the ReliabilityFirst Corp. (RFC), and the Midwest Reliability Organization (MRO) were among the biggest gainers, adding a combined 23 GW of wind and lifting their share of renewables capacity from less than 10 percent apiece in 2004 to 18, 12, and 16 percent, respectively, in 2010 (<i>see Figure 6</i>).</p>
<p>Renewables technologies other than wind have also helped new regions of the country gain footholds. For instance, several states with relatively scant solar resources—Massachusetts, New Jersey, and Oregon—have seen significant growth in PV installations, in large part due to solar set-asides in their RPS mandates.</p>
<p>The development of renewable generation and supporting industries has made them an integral part of local economies in regions throughout the country. With few other industries in growth mode, local politicians and economic development officials have extended a range of tax breaks and other incentives to attract renewable energy companies.</p>
<p>The sector’s geographic diversity has also helped it address specific technical challenges, including the intermittent nature of renewable energy sources. Distributing renewables capacity more broadly across the country helps to mitigate such variability—that is, the wind blows in different places at different times.</p>
<p><b>An Upstart Industry </b></p>
<p>Compared to several decades ago, when the renewables landscape was relatively bare and uncomplicated, the sector has attracted a range of players from different industries and geographies. These new constituents have joined with industry veterans to form a strong ecosystem of developers, suppliers, customers, financiers, and others. The emergence of this ecosystem, which accelerated during the recent boom, has brought needed innovation and capabilities to the industry, and helped to reduce its reliance on subsidies alone.</p>
<p>The new players can be segmented into three categories: those that improve technology, those that improve project economics, and those that improve commercialization and marketing.</p>
<p>In recent years, market entrants from other established industries have brought new technologies into the renewables industry, which has helped to lower installed costs and improve efficiency. Nowhere is this more evident than in the solar market, where several big players have joined the fray to take their own shot at capitalizing on the market’s growth. General Electric is reentering the solar battle with a new CdTe design, directly taking on market leader First Solar. Boeing is getting into the mix by applying technology first developed in its satellite business to achieve potentially record-breaking efficiencies for solar panels.</p>
<p>Technology firms increasingly are integrating downstream across the renewables value chain. For example, leading Chinese solar PV wafer and cell manufacturers, such as ReneSola and JA Solar, have expanded their businesses to include module assembly, a critical step in the value chain with low barriers to entry. Further downstream, Sharp and First Solar, manufacturers of solar panels and modules, acquired large solar project developers over the last two years to gain a dedicated sales channel in a competitive development environment and to have an integrated, end-to-end play within the solar market.</p>
<p>Additionally, the renewables sector has experienced dramatic growth in the number of project developers, financial players, and other intermediaries, and this trend has been one of the most critical factors behind the recent boom.</p>
<p>Large international merchants looking for geographic diversification as well as small startups with hopes of landing their first customers were among the throng of project developers that flooded the U.S. market over the past several years. Their participation has helped to identify the most attractive sites and to secure financing, creating a steady pipeline of renewable installations with great potential. Significant competition among developers has helped to maintain pricing discipline in power purchase agreements (PPA). Also, such companies as SolarCity have helped to stoke latent residential demand by leasing solar PV systems for home installations, thereby addressing potential customers’ concerns about financing these expensive systems and managing their maintenance. Though consolidation is likely to occur in the coming years, the robust developer market has already provided a strong foundation on which the industry can continue to grow.</p>
<p>Over the same period, a diverse group of financial players entered the market, providing the funding the industry needed to establish its footing and to identify avenues to cut capital costs and installed project costs. In recent years, a number of firms began specializing in renewables financing, while tax equity partners became increasingly involved; these solutions have offered innovative approaches to overcoming the limitations of existing financial incentives. Infrastructure funds joined them by adding renewables positions for long-term steady cash flows, a trend that likely will continue.</p>
<p>Intermediaries such as REC brokers and green power marketers have provided additional channels to improve project economics. The creation of companies such as Sterling Planet and Green Mountain Energy has enabled project developers to secure incremental sources of revenue to achieve positive net present value.</p>
<p>Going forward, the continued growth of smart grid companies and energy storage providers will play a critical role in enabling the next wave of renewables development. Successful development of economical energy-storage technologies would solve many of the intermittency challenges faced by wind and solar, improving project economics. Similarly, the widespread adoption of smart meters and variable pricing will make solar power more attractive, given that its greatest output is during the day, when demand is at its peak.</p>
<p>In addition, investor-owned utilities likely will begin to diversify upstream into new parts of the renewables value chain. Companies such as Duke Energy and Exelon have already acquired large asset ownership and development positions. Utilities that build and own the renewable generation and transmission infrastructure, as opposed to simply purchasing energy through PPAs, will have more balance-sheet flexibility than smaller renewables financial players do in building the new transmission lines required to bring renewable power from remote areas to load centers.</p>
<p>Further, the introduction of innovative business models—particularly those that address the technology’s sometimes steep up-front costs—likely will decide the pace at which renewables are deployed in the marketplace. One of the most important drivers of growth in commercial solar installations was the introduction of long-term, fixed-price contracts for electricity. SunPower and other companies have introduced new pricing structures whereby they install solar panels on customer rooftops and charge monthly fees—similar to SolarCity’s lease arrangements—rather than requiring customers to incur large, up-front capital expenditures.</p>
<p>Similar approaches will be needed if the sector is to fully tap the potential in the residential and small commercial market. Different segments of the market will have different wants and needs, but the features are likely to include quick and economical installations, predictable power prices with no up-front investment necessary, and more elegant designs. A number of companies already are offering more sophisticated commercialization and marketing, but more business model innovation will no doubt occur as the renewables market matures.</p>
<p>The same is true for the way technologies are applied. Gone are the days when solar PV panels were considered only for small rooftop systems. Increasingly, renewables technologies are broadening in scope when it comes to their potential application.</p>
<p>For instance, many solar PV manufacturers remain singularly focused on megawatt-sized projects, but some thin-film rivals are pursuing breakthroughs in off-grid applications in a range of markets.</p>
<p>New consumer goods—such as briefcases with solar power chargers for mobile phones—are expected to spur a compound annual growth rate of 30 percent in the $300 million market for flexible thin-film PV modules.</p>
<p>The military is another likely channel for future growth. The energy demands of the military are considerable: For every gallon of fuel that reaches Afghanistan, six gallons are expended getting it there. Solar PV has the potential to substantially alter the military’s dependence on fossil fuels.</p>
<p>PV modules also could bring electricity to many locations in the developing world where the grid is underdeveloped and consumer electronics such as mobile phones have leapfrogged the infrastructure built to support them.</p>
<p>Much work remains to make these markets commercially viable for photovoltaic applications, but all have the potential to drive disruptive change in the growth of demand for and the manufacturing supply of PV modules. One day, these new markets could dwarf the traditional rooftop market.</p>
<p><b>New Level of Scrutiny </b></p>
<p>Renewables have been a hotbed of activity in the past decade, attracting a wide variety of companies—asset developers, domestic and international utilities, technology companies, and financial companies among them. The evolving environment continues to present opportunities for investment.</p>
<p>However, given the uncertainty and complexity in the renewables marketplace, investment decisions are now much more difficult and require decision-making skills and tools that weren’t as essential before the economic downturn. Going forward, investment decisions will need to explicitly address uncertainty through effective risk management and contingency planning. For example, utilities that are looking to add renewable assets will need to take into consideration RPS mandate requirements, resource availability, regulatory treatment, subsidies, technology alternatives, technology costs, and rate impacts. In some cases, even those investments with promising near-term value will need to be evaluated on the basis of their ability to maintain downstream flexibility and adapt to future fluctuations in demand.</p>
<p>Furthermore, it will be critical for companies to develop the capabilities needed to both evaluate and add value to the assets and technologies that are likely to reenter the market in the months and years ahead. The relatively favorable investment climate of the past decade attracted a number of companies lacking the expertise to endure and win in this more difficult investment environment. For example, a number of small utilities and other companies made subscale investments in renewables where they could add little value, and they might soon be forced to divest those assets. The companies that can pick up the assets and position them to create a sustained competitive advantage will position themselves for strength in this market.</p>
<p>Successful renewable asset owners share a number of qualities. They typically have location and portfolio advantages, with assets in resource-abundant geographies and the ability to combine them with other existing assets in their portfolio. In addition, they have distinct capabilities, including technology knowledge, project financing expertise, project development skills, operations and maintenance ability, and trading and marketing savvy. These capabilities vary by the type of player. For example, trading and marketing savvy is more important for unregulated players that don’t have access to captive customers, particularly if they are pursuing merchant positions. Capabilities can also be complementary. Utilities and merchants with financial flexibility and operating experience, for instance, are natural partners for financially constrained developers with technology expertise.</p>
<p>Companies vying for ownership of renewable assets can accomplish this through either development or acquisition. Utilities, merchants, and international companies typically go down the development path, either on their own or through joint ventures with pure-play developers—though in some cases, they acquire skilled developers to add or expand their asset development capabilities. The other option is acquiring assets with PPAs from pure-play developers to mitigate development risks.</p>
<p>As a result, the asset development space is crowded; a wide range of companies have project pipelines in various stages of development. In solar, for instance, many technology players are forward-integrating into asset development; an example is First Solar’s recent acquisition of project development companies NextLight and OptiSolar. In addition to bringing asset development capabilities in-house, such moves help create a market for the company’s products and enable them to capture margins in the highest-margin vertical of the value chain.</p>
<p>One criterion for success in asset development is the ability to secure offtake agreements such as PPAs to guarantee a future income stream. Relatively few developers currently have projects with PPAs, and there’s evidence that developers have been underbidding for PPAs due to the crowded nature of the pure-play competitive space. Merchants and utilities with ambitious plans for renewables, along with forward-integrating technology companies and OEMs with deep pockets, are increasingly on the prowl for developers with established PPAs and capacity at scale.</p>
<p>As the industry matures, there’s likely to be consolidation among companies dominating the asset development segment, including mega-merchants, utility affiliates, and technology firms. While the best of the pure-play developers will survive, the competitive bidding environment will continue to present challenges, limiting returns to the high single digits for even the most adept developers. The capabilities that will help developers differentiate themselves from the pack likely will come from strong project development experience, including siting and construction management. Developing and maintaining a reputable management team that’s able to secure financing and offtake agreements at the right prices will also prove critical.</p>
<p>Given the various challenges of asset development, many industry players prefer to acquire assets as a way to build a position in renewables without taking on development risk. The current state of oversupply in many renewable energy technologies has supported this strategy, as it has pushed prices below replacement cost for many existing generation assets (<i>see Figure 7</i>). As a result, renewables transaction values have reached as low as $1,200 per kilowatt for certain wind generation assets—a significant discount to the levelized cost to build them. Therefore, there’s a clear advantage for asset acquirers that can find undervalued assets.</p>
<p>However, asset prices do vary, depending on their quality and other considerations. For example, assets with secure PPAs trade at a premium, reflecting the safeguard they offer against price fluctuations. While transaction values for wind, biomass, and solar assets generally have fallen during the recession, hydro and geothermal have continued to trade at a premium, reflecting their higher capacity factors and reduced variability.</p>
<p>The growth of the renewables sector has also attracted an assortment of technology plays in the U.S. and across the globe. The solar PV market, for example, has recently drawn in large diversified companies such as General Electric, Hyundai, and Toshiba. At the same time, new and little-known Chinese companies have established themselves as competitors to established leaders.</p>
<p>Similar to renewable asset companies, technology companies face a host of regulatory and market uncertainties in deciding which technology to invest in and where to invest along the value chain. Though the long-term growth prospects are indeed promising, shifting regulatory conditions and continuously evolving technologies will force investors to make significant bets on certain technologies, companies, or markets. For instance, they must consider which technology solutions will dominate in five years and what downstream companies will stand to benefit.</p>
<p>One way to help mitigate these uncertainties is for investors to target companies in the manufacturing and chemical industries that are focused on the higher-margin segments of the renewables value chain. Specialized Technology Resources (STR) is one such company in the solar PV space. PV modules rely on a thin, transparent laminate—a so-called “encapsulant” derived from advanced chemical processing—to protect cells from moisture, ultraviolet rays, and heat. A leading specialist in the encapsulant market, STR has maintained gross margins above 30 percent for several years.</p>
<p>Another potential high-risk, high-reward investment choice relates to emerging renewables technologies. A dramatic reduction in cost or a significant improvement in efficiency could displace incumbent technologies and companies. Several companies in the solar industry, including Nanosolar and MiaSolé, are aggressively investing in R&amp;D to serve two very different markets: utility-scale power and consumer electronics specialty products. Outside investment in a startup renewable energy company offers enormous upside potential in the best case, but the challenge is to pick the right technology and company.</p>
<p>Ultimately, a successful technology play will require a combination of specialty product and innovation capabilities, established positions in adjacent value-chain verticals, an ability to develop a new customer base, an understanding of the renewables marketplace, and the flexibility to adapt to a dynamic market.</p>
<p><b>Meeting the Test </b></p>
<p>Given the more challenging renewables market and political environment, now is the time for companies and investors to take a hard look at their capabilities to ensure that they are sufficient to create a sustained competitive advantage. Truth be told, many companies currently participating in the market don’t meet this test and will likely exit the market in the coming years. Those that survive will need to isolate and strengthen their capabilities, hone their strategies, take advantage of industry consolidation to build scale, and partner with an increasingly diverse array of specialized players to reach and influence the market for their products and services.</p>
<p>To be sure, some of the key policy mechanisms and other supports that triggered the boom in renewables have weakened in the face of one of the most severe economic downturns in modern history. In some ways, though, the renewables sector is richer and more dynamic today than when the boom began. Clear industry leaders are already starting to emerge, but plenty of opportunities remain for those with the vision and the capabilities to power the next era for global energy markets.</p>
</div></div></div><div class="field-collection-container clearfix"><div class="field field-name-field-sidebar field-type-field-collection field-label-above"><div class="field-label">Sidebar:&nbsp;</div><div class="field-items"><div class="field-item even"><div class="field-collection-view clearfix view-mode-full field-collection-view-final"><div class="entity entity-field-collection-item field-collection-item-field-sidebar clearfix">
<div class="content">
<div class="field field-name-field-sidebar-title field-type-text field-label-above"><div class="field-label">Sidebar Title:&nbsp;</div><div class="field-items"><div class="field-item even">&lt;b&gt;New Jersey&amp;rsquo;s SREC Success &lt;/b&gt;</div></div></div><div class="field field-name-field-sidebar-body field-type-text-long field-label-above"><div class="field-label">Sidebar Body:&nbsp;</div><div class="field-items"><div class="field-item even"><!--smart_paging_autop_filter--><!--smart_paging_filter--><p>New Jersey arguably has the nation’s most generous solar renewable energy credit (SREC) mechanism, which helped the state achieve a 13-fold expansion in its solar PV capacity from 2005 to 2009, one of the highest increases in the country.</p><p>New Jersey’s SREC prices have increased from $250 per megawatt hour in mid-2008 to well above $600 today. Throughout much of 2010, the SREC price in New Jersey was more than 10 times the regional wholesale power price and roughly double the SREC price in other states. This price is supported by relatively high set-asides for solar power in the state’s renewable portfolio standard and alternative compliance payment, along with several unique measures to incentivize project financing. The SREC, in combination with investment tax credits and accelerated depreciation, can enable a utility-scale solar plant to earn a 20 to 25 percent internal rate of return.–CD, SA and OW</p><p> </p><p> </p><p> </p><p> </p><p> </p><p> </p><p> </p></div></div></div> </div>
</div>
</div></div></div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/mergers-acquisitions">Mergers &amp; Acquisitions</a></li><li class="taxonomy-term-reference-1"><a href="/article-categories/renewables">Renewables</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1106/images/1106-FEA2.jpg" width="592" height="720" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/american-recovery-and-reinvestment-act">American Recovery and Reinvestment Act</a><span class="pur_comma">, </span><a href="/tags/biomass">Biomass</a><span class="pur_comma">, </span><a href="/tags/boeing">Boeing</a><span class="pur_comma">, </span><a href="/tags/cash-flow">cash flow</a><span class="pur_comma">, </span><a href="/tags/cdte">CdTe</a><span class="pur_comma">, </span><a href="/tags/china">China</a><span class="pur_comma">, </span><a href="/tags/concentrating-solar-power">Concentrating solar power</a><span class="pur_comma">, </span><a href="/tags/congress">Congress</a><span class="pur_comma">, </span><a href="/tags/csp">CSP</a><span class="pur_comma">, </span><a href="/tags/duke-energy">Duke Energy</a><span class="pur_comma">, </span><a href="/tags/electric-reliability-council-texas">Electric Reliability Council of Texas</a><span class="pur_comma">, </span><a href="/tags/electric-reliability-council-texas-ercot">Electric Reliability Council of Texas (ERCOT)</a><span class="pur_comma">, </span><a href="/tags/environmental-protection-agency">Environmental Protection Agency</a><span class="pur_comma">, </span><a href="/tags/ercot">ERCOT</a><span class="pur_comma">, </span><a href="/tags/exelon">Exelon</a><span class="pur_comma">, </span><a href="/tags/feed-tariffs">Feed-in tariffs</a><span class="pur_comma">, </span><a href="/tags/first-solar">First Solar</a><span class="pur_comma">, </span><a href="/tags/fit">FIT</a><span class="pur_comma">, </span><a href="/tags/general-electric">General Electric</a><span class="pur_comma">, </span><a href="/tags/green-mountain-energy">Green Mountain Energy</a><span class="pur_comma">, </span><a href="/tags/hyundai">Hyundai</a><span class="pur_comma">, </span><a href="/tags/infrastructure">Infrastructure</a><span class="pur_comma">, </span><a href="/tags/it">IT</a><span class="pur_comma">, </span><a href="/tags/itc">ITC</a><span class="pur_comma">, </span><a href="/tags/ja-solar">JA Solar</a><span class="pur_comma">, </span><a href="/tags/lcoe">LCOE</a><span class="pur_comma">, </span><a href="/tags/midwest-reliability-organization">Midwest Reliability Organization</a><span class="pur_comma">, </span><a href="/tags/mro">MRO</a><span class="pur_comma">, </span><a href="/tags/nanosolar">Nanosolar</a><span class="pur_comma">, </span><a href="/tags/new-jersey">New Jersey</a><span class="pur_comma">, </span><a href="/tags/nextlight">NextLight</a><span class="pur_comma">, </span><a href="/tags/oem">OEM</a><span class="pur_comma">, </span><a href="/tags/optisolar">OptiSolar</a><span class="pur_comma">, </span><a href="/tags/ot">OT</a><span class="pur_comma">, </span><a href="/tags/ppa">PPA</a><span class="pur_comma">, </span><a href="/tags/pv">PV</a><span class="pur_comma">, </span><a href="/tags/pv-systems">PV systems</a><span class="pur_comma">, </span><a href="/tags/rec">REC</a><span class="pur_comma">, </span><a href="/tags/recovery">Recovery</a><span class="pur_comma">, </span><a href="/tags/reliability">Reliability</a><span class="pur_comma">, </span><a href="/tags/reliabilityfirst-corp">ReliabilityFirst Corp</a><span class="pur_comma">, </span><a href="/tags/renesola">ReneSola</a><span class="pur_comma">, </span><a href="/tags/renewable">Renewable</a><span class="pur_comma">, </span><a href="/tags/renewable-generation">Renewable generation</a><span class="pur_comma">, </span><a href="/tags/rps">RPS</a><span class="pur_comma">, </span><a href="/tags/serc-reliability-corp">SERC Reliability Corp</a><span class="pur_comma">, </span><a href="/tags/sharp">Sharp</a><span class="pur_comma">, </span><a href="/tags/silicon">Silicon</a><span class="pur_comma">, </span><a href="/tags/solar">Solar</a><span class="pur_comma">, </span><a href="/tags/solar-panels">solar panels</a><span class="pur_comma">, </span><a href="/tags/solarcity-0">SolarCity</a><span class="pur_comma">, </span><a href="/tags/specialized-technology-resources">Specialized Technology Resources</a><span class="pur_comma">, </span><a href="/tags/srec">SREC</a><span class="pur_comma">, </span><a href="/tags/sterling-planet">Sterling Planet</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/str">STR</a><span class="pur_comma">, </span><a href="/tags/sunpower">SunPower</a><span class="pur_comma">, </span><a href="/tags/technology">Technology</a><span class="pur_comma">, </span><a href="/tags/toshiba">Toshiba</a><span class="pur_comma">, </span><a href="/tags/wecc">WECC</a><span class="pur_comma">, </span><a href="/tags/western-electricity-coordinating-council">Western Electricity Coordinating Council</a><span class="pur_comma">, </span><a href="/tags/wind">Wind</a><span class="pur_comma">, </span><a href="/tags/wind-power">Wind power</a> </div>
</div>
Wed, 01 Jun 2011 04:00:00 +0000puradmin14097 at http://www.fortnightly.comPeople (November 2010)http://www.fortnightly.com/fortnightly/2010/11/people-november-2010
<div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">People</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - November 2010</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><span class="boldred">New Opportunities: </span><b>DTE Energy</b> announced that president and COO <b>Gerard M. Anderson </b>became president and CEO October 1, taking the reins from <b>Anthony F. Earley Jr.</b> Earley assumed the title of executive chairman of the board and continues as a full-time employee.</p>
<p><b>DPL </b>appointed <b>Arthur Meyer</b> as general counsel of DPL and Dayton Power &amp; Light. He retains duties as senior v.p., corporate and regulatory affairs.</p>
<p><b>Exelon </b>promoted <b>Calvin Butler Jr.</b> to senior v.p. of human resources for Exelon. He previously served as senior v.p. of corporate affairs for ComEd. <b>Victor Fonseca </b>is appointed senior v.p. of compensation and benefits; <b>John Samolis</b> to senior v.p. of labor relations; <b>Michael Campbell </b>to v.p., talent management and HR operations; <b>Ellen Caya</b> to v.p. of cyber and physical security; and <b>Susan Weiss</b> to v.p. of Exelon’s commercial operations group. Exelon also named <b>Mary Streett </b>as v.p. of federal government affairs and <b>Jackie Carney</b> as director of federal government affairs. Streett joins from Mayer Brown LLP and Carney from Bill Carney &amp; Co.</p>
<p><b>OGE Energy</b> appointed <b>William J. Bullard</b> as general counsel for Oklahoma Gas &amp; Electric (OG&amp;E), while continuing to serve as assistant general counsel of PGE Energy.</p>
<p><b>Ameren</b> named <b>Maureen A. Borowski</b> as president and CEO of a new subsidiary dedicated to electric transmission infrastructure investment, Ameren Transmission.</p>
<p><b>GeoGlobal Energy</b> added three geothermal professionals to its technical team. <b>Bob Swanson</b> joined the company as drilling manager, <b>Jim Stimac</b> as senior geologist, and <b>Paula Blaydes</b> as director of environmental permitting and governmental affairs.</p>
<p>The <b>Deloitte Center for Energy Solutions</b> named<b> Branko Terzic</b> executive director. He will continue in his role as regulatory policy leader in Deloitte’s energy &amp; resources industry group. He is a former commissioner at FERC and the Wisconsin PSC.</p>
<p><b>Deloitte </b>added <b>William Hederman</b> to its energy and resources industry group. He was the FERC’s founding director of the market oversight and investigations office.</p>
<p><b>Alison Smith</b>, a former U.S. assistant attorney general, joined <b>McDermott Will &amp; Emery</b> as a partner in the firm’s global antitrust and competition practice group. Smith was principal deputy of the Department of Justice antitrust division and was responsible for enforcement in regulated industries.</p>
<p><b>Steptoe &amp; Johnson</b> on September 1 acquired the energy practice group of the western Pennsylvania law firm of Culbertson, Weiss, Schetroma and Schug. The practice is led by <b>Russell Schetroma</b>, whose practice focuses on oil and gas transactions, most notably the Marcellus shale formation.</p>
<p><b>Chesapeake Utilities</b> announced that <b>Jeffrey R. Tietbohl</b>, v.p., was appointed president of the Maryland-District of Columbia Utilities Association.</p>
<p><b>Atmos Energy</b> appointed <b>Kim Cocklin</b> president and CEO from president and COO. The company also appointed <b>Robert Best</b>, chairman of the board and CEO as executive chairman.</p>
<p>The <b>Electric Power Research Institute </b>(EPRI) promoted <b>Arshad Mansoor</b> from v.p. of EPRI’s power delivery and utilization sector to senior v.p. of research and development. <b>Chris Larson </b>was hired as senior v.p. of operations and comes from service as v.p. and general manager of the nuclear division of Control Components.</p>
<p>The <b>North American Energy Standards Board</b> (NAESB), an industry association for the standardization of wholesale and retail markets for gas and electricity, recently appointed Dr. <b>Scott Coe</b>, vice president of Utility Integration Solutions, Inc. (UISOL) to the Wholesale Electric Quadrant (WEQ) in the technology and services segment.</p>
<p>The <b>U.S. Department of Commerce’s National Institute of Standards and Technology</b> (NIST) appointed Dr. <b>Lawrence E. Jones</b> to a three-year term on the newly-formed 15-member smart grid advisory committee. Jones is global director of strategy and special projects at Alstom. NIST also appointed to the committee <b>Kevin Nolan</b>, vice president of technology for GE Appliances. NIST created the 15-member committee to advise the institute in its efforts to implement smart grid requirements outlined in the <i>Energy Independence and Security Act of 2007</i>.</p>
<p>The <b>American Gas Association </b>(AGA) elected<b> John W. Somerhalder II</b>, CEO of AGL Resources, to serve as chairman of AGA’s board for 2011. The association also elected and re-elected numerous other industry executives to serve on the AGA’s 39-member board. New members elected for a three-year term include: <b>Lawrence T. Borgard</b>, president and COO, Utilities, Integrys Energy Group; <b>Gordon L. Gillette</b>, president, Tampa Electric and Peoples Gas; <b>Edward J. Graham</b>, CEO, South Jersey Industries; <b>Thomas E. Knudsen</b>, CEO, Philadelphia Gas Works; <b>Rodney O. Powell</b>, president &amp; COO, Yankee Gas; and <b>George A. Schreiber, Jr.</b>, CEO, Continental Energy Systems.</p>
<p> </p>
<p><span class="boldred">Boards of Directors: </span><b>Madison Gas and Electric Co.</b> (MGE) elected <b>Mark D. Bugher </b>to the boards of MGE and MGE Energy. He chairs the Wisconsin Technology Council.</p>
<p><b>Sempra Energy</b> re-elected <b>Luis Tellez </b>to its board of directors. He is chairman of the board and CEO of the Mexican stock exchange.</p>
<p><b>ISO New England </b>announced the resignation of <b>Richard E. Kessel</b> from its board, because he accepted a position with a market participant that precludes his continued service.</p>
<p>The <b>National Mining Association </b>elected a slate of officers for a two-year term 2010-2012: <b>Chairman-Greg Boyce,</b> chairman and CEO, Peabody Energy; Vice Chairman-Frank <b>McAllister</b>, chairman and CEO, Stillwater Mining; President-<b>Hal Quinn</b>, president and CEO, NMA; Treasurer-<b>Roger Roberts</b>, <b>senior vice president, NMA; Secretary-Bruce Watzman</b>, senior vice president, NMA; Asst. Secretary-<b>Katie Sweeney</b>, general counsel, NMA.</p>
<p><b>On-Ramp Wireless</b> added <b>John E. Bryson</b> and <b>Thomas R. McDaniel</b> to its advisory board. Bryson is a senior advisor at KKR and a board member at Boeing, The Walt Disney Co., and CODA Automotive. He served at Edison International, the parent company of Southern California Edison, as chairman, president and CEO, and at the Edison Mission Group. McDaniel recently retired from Edison International after 37 years, most recently as executive vice president, CFO and treasurer. He also was CEO and a director of Edison Mission Energy and CEO and a director of Edison Capital. McDaniel serves on the board of Sun Power Corp.</p>
<p><b>Utility Integration Solutions, Inc. </b>(UISOL) announced that environmental advocate <b>Robert F. Kennedy, Jr.</b> has joined the company’s board of directors.</p>
<p> </p>
<p><span class="boldred">Resignations: </span><b>El Paso Electric </b>announced the resignation of <b>George A. Williams, </b>senior v.p. and COO, to pursue other opportunities.</p>
<p><b>Otter Tail </b>announced the resignation of L<b>auris Molbert </b>as executive v.p. and COO effective Dec. 30.</p>
<p> </p>
<p><i>We welcome submissions to People, especially those accompanied by a high-resolution color photograph. E-mail to: <a href="mailto:people@pur.com">people@pur.com</a>.</i></p>
</div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/people">People</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/people">People</a></li></ul></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1011/images/1011-cvr.jpg" width="1121" height="1500" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/aes">AES</a><span class="pur_comma">, </span><a href="/tags/aga">AGA</a><span class="pur_comma">, </span><a href="/tags/agl-resources">AGL Resources</a><span class="pur_comma">, </span><a href="/tags/alstom">Alstom</a><span class="pur_comma">, </span><a href="/tags/ameren">Ameren</a><span class="pur_comma">, </span><a href="/tags/american-gas-association">American Gas Association</a><span class="pur_comma">, </span><a href="/tags/anthony-f-earley-jr">Anthony F. Earley Jr.</a><span class="pur_comma">, </span><a href="/tags/boeing">Boeing</a><span class="pur_comma">, </span><a href="/tags/chesapeake-utilities">Chesapeake Utilities</a><span class="pur_comma">, </span><a href="/tags/coda-automotive">CODA Automotive</a><span class="pur_comma">, </span><a href="/tags/comed">ComEd</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/dpl">DPL</a><span class="pur_comma">, </span><a href="/tags/dte-energy">DTE Energy</a><span class="pur_comma">, </span><a href="/tags/edison-international">Edison International</a><span class="pur_comma">, </span><a href="/tags/edison-mission-energy">Edison Mission Energy</a><span class="pur_comma">, </span><a href="/tags/el-paso-electric">El Paso Electric</a><span class="pur_comma">, </span><a href="/tags/electric-power-research">Electric Power Research</a><span class="pur_comma">, </span><a href="/tags/electric-power-research-institute">Electric Power Research Institute</a><span class="pur_comma">, </span><a href="/tags/energy-independence-and-security-act">Energy Independence and Security Act</a><span class="pur_comma">, </span><a href="/tags/epri">EPRI</a><span class="pur_comma">, </span><a href="/tags/esb">ESB</a><span class="pur_comma">, </span><a href="/tags/exelon">Exelon</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/integration">Integration</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/iso-new-england">ISO New England</a><span class="pur_comma">, </span><a href="/tags/lawrence-t-borgard">Lawrence T. Borgard</a><span class="pur_comma">, </span><a href="/tags/madison-gas-and-electric">Madison Gas and Electric</a><span class="pur_comma">, </span><a href="/tags/mge-energy">MGE Energy</a><span class="pur_comma">, </span><a href="/tags/national-institute-standards-and-technology">National Institute of Standards and Technology</a><span class="pur_comma">, </span><a href="/tags/nist">NIST</a><span class="pur_comma">, </span><a href="/tags/oge-energy">OGE Energy</a><span class="pur_comma">, </span><a href="/tags/peabody-energy">Peabody Energy</a><span class="pur_comma">, </span><a href="/tags/peoples-gas">Peoples Gas</a><span class="pur_comma">, </span><a href="/tags/security">Security</a><span class="pur_comma">, </span><a href="/tags/sempra">Sempra</a><span class="pur_comma">, </span><a href="/tags/sempra-energy">Sempra Energy</a><span class="pur_comma">, </span><a href="/tags/south-jersey-industries">South Jersey Industries</a><span class="pur_comma">, </span><a href="/tags/southern-california-edison">Southern California Edison</a><span class="pur_comma">, </span><a href="/tags/tampa-electric">Tampa Electric</a><span class="pur_comma">, </span><a href="/tags/technology">Technology</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a><span class="pur_comma">, </span><a href="/tags/uisol">UISOL</a><span class="pur_comma">, </span><a href="/tags/utility-integration-solutions">Utility Integration Solutions</a><span class="pur_comma">, </span><a href="/tags/williams">Williams</a><span class="pur_comma">, </span><a href="/tags/wisconsin-psc">Wisconsin PSC</a> </div>
</div>
Mon, 01 Nov 2010 04:00:00 +0000puradmin13570 at http://www.fortnightly.comVendor Neutralhttp://www.fortnightly.com/fortnightly/2010/04/vendor-neutral
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-import-category field-type-text field-label-inline clearfix"><div class="field-label">Category:&nbsp;</div><div class="field-items"><div class="field-item even">Vendor Neutral</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - April 2010</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><h4>Generation </h4>
<p><span class="boldred">FEI Company</span>, a diversified scientific instruments company providing electron and ion-beam microscopes and tools for nanoscale applications, completed a multiple system installation at the Materials Ageing Institute (MAI) in France, a utility-oriented research center financed by Electricite de France, the Tokyo Electric Power Co., the Kansai Electric Power Co. and the U.S. Electric Power Research Institute. The MAI microscopy laboratory has now commissioned its new FEI Titan Scanning Transmission Electron Microscope (S/TEM) microscope, the most powerful commercially-available microscope in the world. The Titan joins the MAI’s FEI Tecnai S/TEM, Helios DualBeam and Quanta 600 Field Emission Gun (FEG) in one of the world’s premier microscopy facilities, where they will be used to study the aging of materials to improve the reliability and safety, and extend the lifetimes, of nuclear and non-nuclear power plants. </p>
<p><span class="boldred">Alstom</span> won a contract worth E90 million for the automation of Eskom’s latest thermal power plant project, Kusile in South Africa. Alstom Power will engineer, supply and install its latest ALSPA Series 6 Distributed Control System (DCS). The contract follows a similar order in November 2009 for Kusile’s sister plant, Medupi and forms part of Eskom’s multi-billion rand expansion program to double South Africa’s electricity capacity in the coming decades. This program covers the building of new capacity (like Kusile and Medupi) and optimizing existing fleets (such as retrofitting nuclear and coal plants, including Koeberg and Arnot). Alstom’s flexible control system is expected to help Eskom by enabling real-time information exchange between baseload and renewable power plants. </p>
<p><span class="boldred">Ventyx</span> announced that Romanian nuclear operator CNE Cernavoda, in conjunction with its business partner SIVECO Romania, successfully implemented the Ventyx Asset Suite enterprise asset management (EAM) software solution to manage maintenance and safety operations for its nuclear plants at Cernavoda, and has made a new four-year commitment to extend the deployment to the entire nuclear operation. CNE and SIVECO deployed Asset Suite across CNE’s two currently operational plants, Units 1 and 2, supporting a total of 600 users. As part of the new agreement, CNE committed to extend the solution to 1,000 users and deploy additional Asset Suite modules, including Engineering Change, Personnel Qualifications, Project Management and Total Exposure. </p>
<p>The Vineland N.J. Ramada hotel announced completion of its newly installed on-site solar project. In cooperation with <span class="boldred">Pfister Energy</span>, the Ramada recently completed a 500-kW ground-mounted system that consists of 235-watt solar photovoltaic panels. The system will generate 620 kW hours of electricity per year, enough to power the equivalent of 50 households. The solar system’s clean renewable output will avoid the release of 863,220 lbs of carbon, 4,717 pounds of sulfur and 1,552 pounds of nitrogen emissions every year. “The Vineland Ramada will be the first member of the Wyndam Hotel family to be powered by the sun in the state of New Jersey,” said owner John Scipione. </p>
<p><span class="boldred">tenKsolar</span> executed an agreement with the National Rural Telecommunications Cooperative (NRTC) for sales of the company’s high output solar photovoltaic systems to rural electric cooperatives. tenKsolar is bringing to market the RAIS PV module, a proprietary, high output, reliable photovoltaic system that delivers maximum energy density at the lowest cost. According to NRTC President and CEO Bob Phillips, “With the innovative design and affordability of tenKsolar, electric co-ops can engage their consumer-members as partners in distributed generation.” </p>
<p><span class="boldred">Wärtsilä </span>and Hitachi Zosen have signed a business development agreement to develop and market fuel-cell based power solutions for distributed power generation applications in Japan. The combined heat and power applications, which can be run on either city gas or bio gas, will feature the use of Wärtsilä’s fuel cell technology. The applications will be developed in cooperation by both companies, and marketed by Hitachi Zosen. “This is an important step towards the commercialization of fuel cell technology,” says Mr. Erkko Fontell, director, fuel cells, Wärtsilä Finland. </p>
<p><span class="boldred">3TIER</span> completed its REmapping the World initiative, which was launched in March 2008 to address the biggest barrier to global renewable energy adoption—the lack of reliable information regarding resource potential and availability. With release of a global solar map and dataset, the company has completed its unprecedented goal of identifying and mapping the world’s wind and solar resources using a globally consistent methodology. The newly released global solar map and dataset is based on 10 to 13 years of half-hourly, high-resolution visible satellite imagery collected from nine different satellites, dispersed across the globe and covering the entire surface of the earth. Satellite imagery was processed using a uniform methodology based upon a combination of in-house and peer-reviewed research documents supported by the global atmospheric science community. </p>
<p><span class="boldred">The Switch</span> signed an agreement to supply two of its direct-drive, The Switch Drive prototypes with Schuler Group of Germany. The package consists of completely tailored 3-MW permanent magnet generators optimized to work with 2.7-MW full-power converters. The custom-built The Switch Drive permanent magnet generator and full-power converter prototype packages are scheduled for delivery and testing in April 2011. By summer the same year, they will be connected to the grid in full operation. The Schuler Group is expanding beyond its focus on the automotive industry into the wind market and aims to develop and supply large-scale wind power plants for Germany initially, and then other Central European and international markets. </p>
<p><span class="boldred">groSolar</span>, a solar power distributer and installer, joined with SOLON Corp., a North American photovoltaic manufacturer, allowing groSolar to distribute and install American-made SOLON modules that are produced in SOLON’s Tucson, Arizona factory, which currently has approximately 100 MW of annual production capacity. SOLON’s modules qualify for the “Buy American” provisions of the federal stimulus package known as the American Recovery and Reinvestment Act. groSolar will begin distributing SOLON’s PV-modules to its nationwide network of dealer-installers in April, and will be installing SOLON modules on select projects throughout the nation. </p>
<h4>Metering </h4>
<p>The City of Santa Rosa, Calif., completed implementation of <span class="boldred">CIS Infinity</span>, the customer information and billing solution from Advanced Utility Systems. The city provides water and wastewater service to approximately 52,414 customers that include residential, commercial and industrial accounts. To handle billing for many of these accounts, complex rate configuration and formulas are required. Patty Kutches, revenue operations supervisor explains, “We have a sizeable number of accounts that present fairly complicated billing scenarios. For example, we have to deal with instances of looped meters as well as additive and deduct meters.” The City went live on Infinity.Link—the advanced electronic bill payment and presentment solution—concurrently with CIS Infinity. </p>
<p><span class="boldred">Telvent</span> launched its Telvent Conductor MDM that will allow the processing and assimilation of mass amounts of data from multiple AMI networks, turning this data into business information that can be made available to the entire company. Electric companies will have access to a system that integrates the entire scope of the AMI metering information and automates business processes in real time. The company says the solution, developed on a flexible architecture, is scalable so that utilities can interconnect multiple AMI networks and jointly manage millions of data items to reduce complexity and costs. Using the intelligence generated, utility managers will be able to develop innovative designs, including customized fees, time of use, and other time-dependent structures. The system is based on the PI platform from OSIsoft, which powers the acquisition, storage and recovery of data in real time on a large scale. </p>
<h4>T&amp;D and Smart Grid </h4>
<p><span class="boldred">Arcadian Networks</span> in March launched the AE20r, a second generation router-gateway that integrates multiple technologies with numerous applications and devices. The AE20r is designed to allow utilities to gather real-time information from virtually any converged platform, permitting utilities to manage and monitor assets and to generate smart-grid efficiencies. The new device combines Arcadian’s licensed 700-MHz spectrum with an interface to WiMAX. The multiple AE20r interfaces are capable of supporting: Arcadian 700 MHz; WiMAX (802.16e, 802.16d); Wi-Fi (802.11b/g/n); 3G/4G (EVDO,GPRS,EDGE,HSPA,LTE); Serial, USB, Ethernet; and 900 MHz (ISM and MAS) industrial radio. The unit provides a standards-based platform enabling third-party integration of network management and control systems. </p>
<p><span class="boldred">Open Systems International, Inc.</span> (OSI) has been selected by the Trinidad &amp; Tobago Electricity Commission (T&amp;TEC) to supply a comprehensive new distribution SCADA system intended to secure and modernize the national distribution grid of Trinidad &amp; Tobago. T&amp;TEC is primarily a T&amp;D company; however, it also possesses a 51 percent equity interest in the largest generation company in the country. T&amp;TEC selected OSI’s monarch (Multi-platform Open Network ARCHitecture) technology to be implemented as a new distribution SCADA platform, to improve the security, reliability and functionality of Trinidad and Tobago’s national power distribution operations, facilitating industrial and commercial productivity, as well as overall economic growth. </p>
<p><span class="boldred">IBM</span> and <span class="boldred">Johnson Controls</span> teamed up to provide a smart building solution that can improve operations and reduce energy and water consumption in buildings worldwide. </p>
<p>Building on an existing relationship formed between the two organizations in 2007 to create energy efficient data centers, the new offering is intended to benefit any building or portfolio of buildings. Key elements of the offering are designed to address critical building performance areas including systems integration, energy management, enterprise reporting, space utilization, and asset management. </p>
<p>The <span class="boldred">Demand Response and Smart Grid Coalition </span>(DRSG) announced that seven new members have joined the group. The new members are Ambient Corporation, Johnson Controls, Lockheed Martin, Boeing, EnergyConnect, CALMAC, and EnOcean Alliance. </p>
<p>DRSG is the trade association for companies that provide products and services in the areas of demand response and smart-grid technologies and practices. </p>
<p><span class="boldred">Convergys </span>entered into a global strategic relationship with Microsoft and introduced the Convergys Smart Communications Suite powered by Microsoft. Currently under development, the solution will provide a comprehensive next-generation business support system aimed at improving the customer experience. By combining Microsoft Dynamics CRM and Microsoft SQL Server 2008 R2 with the modular business support system capabilities of Convergys, the solution supports a shared vision of enabling service providers to rapidly deliver a wide range of new and differentiated services. The Suite is flexible, scalable and interoperable with existing systems and third-party applications, as well as with varying deployment models, and the solution is intended to offer an alternative to rival billing and CRM platforms. </p>
<p><span class="boldred">Pioneer Power Solutions’ </span>wholly-owned subsidiary, Pioneer Transformers Ltd., entered into two contracts with Hydro-Quebec. The first is a renewal of Pioneer’s 2006 master agreement for the production of pad-mount transformers. They are designed for use in grade level and underground commercial and residential electric distribution systems. Pioneer also entered a first-time contract for the supply of submersible transformers. Like the pad-mount contract, the submersibles agreement provides for a maximum term of four years, including extension options. </p>
</p>
</div></div></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/article_images/1004/images/1004-VEN.jpg" width="638" height="466" /></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/3tier">3TIER</a><span class="pur_comma">, </span><a href="/tags/alstom">Alstom</a><span class="pur_comma">, </span><a href="/tags/american-recovery-and-reinvestment-act">American Recovery and Reinvestment Act</a><span class="pur_comma">, </span><a href="/tags/ami">AMI</a><span class="pur_comma">, </span><a href="/tags/arc">ARC</a><span class="pur_comma">, </span><a href="/tags/boeing">Boeing</a><span class="pur_comma">, </span><a href="/tags/cis">CIS</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/communication">Communication</a><span class="pur_comma">, </span><a href="/tags/dc">DC</a><span class="pur_comma">, </span><a href="/tags/demand-response-and-smart-grid-coalition">Demand Response and Smart Grid Coalition</a><span class="pur_comma">, </span><a href="/tags/dg">DG</a><span class="pur_comma">, </span><a href="/tags/dr">DR</a><span class="pur_comma">, </span><a href="/tags/drsg">DRSG</a><span class="pur_comma">, </span><a href="/tags/electric-power-research">Electric Power Research</a><span class="pur_comma">, </span><a href="/tags/electric-power-research-institute">Electric Power Research Institute</a><span class="pur_comma">, </span><a href="/tags/electricite-de-france">Electricite de France</a><span class="pur_comma">, </span><a href="/tags/ev">EV</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/hydro">Hydro</a><span class="pur_comma">, </span><a href="/tags/hydro-quebec">Hydro-Quebec</a><span class="pur_comma">, </span><a href="/tags/ibm">IBM</a><span class="pur_comma">, </span><a href="/tags/johnson-controls">Johnson Controls</a><span class="pur_comma">, </span><a href="/tags/lockheed">Lockheed</a><span class="pur_comma">, </span><a href="/tags/lockheed-martin">Lockheed Martin</a><span class="pur_comma">, </span><a href="/tags/mdm">MDM</a><span class="pur_comma">, </span><a href="/tags/microsoft">Microsoft</a><span class="pur_comma">, </span><a href="/tags/national-rural-telecommunications-cooperative">National Rural Telecommunications Cooperative</a><span class="pur_comma">, </span><a href="/tags/network">Network</a><span class="pur_comma">, </span><a href="/tags/new-jersey">New Jersey</a><span class="pur_comma">, </span><a href="/tags/nrtc">NRTC</a><span class="pur_comma">, </span><a href="/tags/open-systems-international">Open Systems International</a><span class="pur_comma">, </span><a href="/tags/pv">PV</a><span class="pur_comma">, </span><a href="/tags/recovery">Recovery</a><span class="pur_comma">, </span><a href="/tags/scada">SCADA</a><span class="pur_comma">, </span><a href="/tags/solar">Solar</a><span class="pur_comma">, </span><a href="/tags/solon">SOLON</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/telvent">Telvent</a><span class="pur_comma">, </span><a href="/tags/tokyo-electric-power">Tokyo Electric Power</a><span class="pur_comma">, </span><a href="/tags/tokyo-electric-power-co">Tokyo Electric Power Co.</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a> </div>
</div>
Thu, 01 Apr 2010 04:00:00 +0000puradmin13629 at http://www.fortnightly.comFortnightly 40 Best Energy Companieshttp://www.fortnightly.com/fortnightly/2006/09/fortnightly-40-best-energy-companies
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Superior asset management, exceptional cost discipline, and magnificent growth opportunities define the winners of our second annual financial ranking.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Richard Stavros</p>
</div></div></div><div class="field field-name-field-import-bio field-type-text-long field-label-inline clearfix"><div class="field-label">Author Bio:&nbsp;</div><div class="field-items"><div class="field-item even"><p><b>Richard Stavros</b> is the executive editor of <i>Public Utilities Fortnightly</i>.</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - September 2006</div></div></div><div class="field field-name-field-import-image field-type-image field-label-above"><div class="field-label">Image:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/0609-FEA1-fig0.jpg" width="3000" height="2029" alt="" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/0609-FEA1-fig1.jpg" width="952" height="591" alt="" /></div><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/0609-FEA1-table1.jpg" width="952" height="696" alt="" /></div><div class="field-item odd"><img src="http://www.fortnightly.com/sites/default/files/0609-FEA1-table2.jpg" width="1919" height="1891" alt="" /></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>In 2005, the inaugural year of the <em>Fortnightly 40</em> <em>(F40)</em> financial rankings of electric and gas utilities, pipelines, and distribution companies, the industry wanted to know who the best energy companies were, and we told them. Given the increasing diversification of electric utilities into exploration and production (E&amp;P), and E&amp;P companies into local gas distribution and pipelines, operational benchmarking analysis (and other measures) no longer offer meaningful answers to the questions senior executives have about how best to measure their companies.</p>
<p>In fact, the industry and our readers demand a type of analysis that more truly communicates value to future investors, future owners, energy asset operators, regulators, and consumers <em>(see sidebar; “The Performance Standard”)</em>.</p>
<p>The <em>F40</em> was unveiled in 2005 to critical acclaim. Several top energy companies like MDU Resources and UGI reported their standing in the <em>F40</em> in their quarterly earnings, in annual reports, and at shareholder meetings. Furthermore, according to anonymous sources, Kinder Morgan—which topped the list last year as well as this year—presented its <em>F40</em> standing as a means to communicate its management value to Canadian regulators as part of the company’s high-profile, $5.6 billion acquisition of Terasen in 2005.</p>
<p>In addition, the <em>F40</em> is bolstered further this year by the realization that two of the top companies, Kinder Morgan and Duquesne, are entertaining offers by management and private-equity firm consortiums to take their companies private. Kinder Morgan’s $13.5 billion deal would be the largest management-led buyout in history and one of the largest leveraged buyouts ever.</p>
<p>“At Kinder Morgan Energy Partners, we believe that that offer is a tremendous vote of confidence in the growth opportunities for [us]” says C. Park Shaper, president of Kinder Morgan Inc. (KMI), and Kinder Morgan Energy Partners LP (KMP). “Management and the other sponsors would not be willing to make that offer, to offer the KMI shareholders an 18.5 percent premium, unless they believed that KMP would continue to have great growth opportunities going forward,” he says.</p>
<p>And in respect to this year’s number 1 ranking, Shaper graciously accepts it: “We are honored that Kinder Morgan Energy Partners would earn that spot.”</p>
<p>Even as we have begun to identify the best energy companies via the <em>F40</em>, discussions about the ranking are developing into a long-term intellectual debate in financial circles. What is management doing to achieve the <em>F40</em> level of performance? What is it about the management of Edison International that returns the company to the list for a second year in row? What is the secret of TXU’s success, as it rockets to the middle of the list? And how do LDCs like WGL Resources (parent of Washington Gas) manage to hold their own with super-growth companies like Energen, an E&amp;P company and LDC?</p>
<h4>Standing in the Pantheon</h4>
<p>What does it mean to be on the <em>F40</em> in 2006? Jim Hendrickson, lead partner for the North American Utilities Strategy practice at Accenture, says that placement in the <em>F40</em> indicates a well-run, solid, asset-intensive business. “If you have year-over-year good predictable operating earnings, you will show up on the <em>F40</em>,” he says.</p>
<p>Of course, consistent performance over time is the Holy Grail of corporate management, and a focus of many of the executives that made the list. Hendrickson notes that his research and considerable business literature on the subject shows that very few companies achieve sustainable performance over a 10-year period. For utilities, in particular, earnings volatility earns a market discount.</p>
<p>But clearly, being on the <em>F40</em> means a company has been consistent on many different measures over a three-year period, says Jean Reaves Rollins, managing partner at the C Three Group LLC.</p>
<p>The <em>F40</em> is not forgiving if you fail to maintain sustainable performance.</p>
<p>“If you have one bad year, it’s going to take you down in any measure of the key measures that the DuPont Hybrid looks at,” Rollins says. <em>(Rollins analyzes the F40 model [the Dupont Hybrid] and its predictability of shareholder value.)</em></p>
<p>For example, she explains, Duquesne earns high honors this year because in the previous years management sold off many of the disparate businesses. “What the current management did wasn’t sexy. They got in there and cleaned the balance sheet up and got it down to a basic business that could be evaluated pretty easily,” she says.</p>
<p>Hendrickson and Rollins found mixed results when trying to correlate total return to shareholders (TRS) (a popular performance method) with the <em>F40</em> (DuPont Hybrid), but they agree that using the <em>F40</em> and TRS models is an effective way to identify corporate performance.</p>
<p>Meanwhile, WGL Holdings Chairman and CEO James H. DeGraffenreidt Jr. found this year’s <em>F40</em> results were consistent with some of the long-term internal benchmarks that his company has used to chart its performance.</p>
<p>“We also put out five years of financial objectives three years ago, where we said we were going to generate free cash flows. … We said we were going to grow earnings on average 5 percent per year over that five-year period. We said we were going to maintain a strong credit rating, and we are one of the strongest credits in our sector. … And [we will] maintain our ability to maintain the dividend.</p>
<p>“So, you are seeing the culmination of all of that in the 2003 through 2005 three-year increment that the <em>F40</em> measures,” DeGraffenreidt Jr., says.</p>
<p>John E. Bryson, chairman, president, and CEO of Edison International, also shows exceptional consistency in the management of his company. He says all the <em>F40</em> measures became negative during the California crises, which began in the 2000-2001 timeframe. Bryson, in less than five years, not only was able to save his company from the brink of bankruptcy, but exceed the company’s performance measures that existed before the crisis. It also didn’t hurt that Edison International, which has a large, low-cost coal fleet, is in one of the country’s highest-growing service territories: Southern California.</p>
<p>“I think looking at a three-year time horizon is a good way to think about performance,” he says of the <em>F40’s</em> time frame. “We tend to look at three-, five- and 10-year periods. Ours is a capital-intensive business where there will be times when commodity values are up and commodity values are down. Since we have to operate a company and we have to make long-term capital investments and with long-term returns, we like those kind of time horizons.”</p>
<p>Taking a long-term view hasn’t hurt Edison International’s shareholders. “Edison International returned to shareholders over 300 percent over the three years covered by the <em>F40</em>,” he explains. In the aggregate over five years through the power crises, Edison International returned 200 percent.</p>
<p>Finally, Mike Childers, CEO of generation development, TXU, tells how the management of his company’s generation fleet has changed over the last three years and contributed to the company success and placement on the <em>F40</em>.</p>
<p>“We really embarked on being a top-tier industrial company operating generation assets as opposed to a utility operating generation assets. I draw the differentiation there in that, historically, our coal-fired assets operated in the low 80 percent availability capacity factor range. Today, they are operating at 92, 93, and 95 [percent]. Our nuclear plant operated down at the same range; year-to-date in 2006, it is operating at 99 percent. We have done that through a couple of operational changes in a new system that we dubbed the TXU operating system,” he says.</p>
<p>Childers attributes the improvement in the company’s assets management to a series of lean manufacturing approaches that TXU learned from other industries and imported. “We spent a lot of time with Toyota, with Georgia Pacific, with Boeing, with a lot of major manufacturers who work in commodity-type businesses. We learned and studied from them the lean operating practices of best-of-class and world-class manufacturing capability, and we brought that to our operating system. And our operating statistics have moved from middle of the pack to top tier.”</p>
<h4>Debating the Dividend</h4>
<p>There is one measure on the <em>F40</em> that energy industry executives still agree to disagree on: payment of the dividend. Many executives believe that payment of dividends reflects a strong balance sheet and optimism about a company’s financial performance and its future growth prospects. For some regulated and diversified utilities, it is a source of pride to pay a dividend. But as some companies increasingly earn higher and higher unregulated earnings through high-growth investments, they want to reinvest those earnings to further grow the business.</p>
<p>The contrast between these two views on dividend can be illustrated through the divergent comments of the CEOs from Energen and WGL Holdings. Take the view of WGL’s DeGraffenreidt Jr. on the dividend.</p>
<p>“We have paid the dividend for 155 consecutive years, and we have raised the dividend for 30 years in a row. I like to point out that we have paid dividends through the Civil War, the Depression, World Wars I and II, all through the Vietnam conflict, all through the hyper inflation of the 1970s. That is our commitment to financial strength,” he says.</p>
<p>But, as stated earlier, not everyone is enamored with paying the dividend. William Michael Warren Jr., chairman of the board and CEO at Energen, has a much different view. He likes everything about the F40 except the dividend metric.</p>
<p>“Of the list of six that you’ve given, profitability is a focal point for us. Of your six metrics, five of those six I really pay attention to,” he says.</p>
<p>However, “the dividend yield is totally meaningless to me, and … near meaningless to an MDU Resources or Questar. It should be to any of the companies that have significant non-regulated assets,” he says.</p>
<p>Some analysts believe the dividend is the great equalizer between super growth E&amp;P companies on the <em>F40</em> and regulated and diversified utilities with lower growth levels. Other analysts believe Energen’s view of the dividend may prevail in the end, as more and more utilities earn more from their unregulated operations.</p>
<p>In fact, Energen started as a sleepy Alabama LDC and turned itself in to an E&amp;P powerhouse.</p>
<p>“Ten years ago, 80 percent of our company earnings came from Alabama gas, the utility. Twenty percent came from our diversified—primarily oil and gas—exploration and production business. Today, it is the exact opposite of that,” Warren says.</p>
<p>Warren notes the transformation began to occur eight to 10 years ago, when several utilities became somewhat discouraged with the slow pace of utility growth and began exploring ways to diversify away from the regulated utility into related energy businesses to which they could transfer corporate skills. Many of this year’s <em>F40</em> companies diversified and found new opportunities in unregulated businesses.</p>
<p>But even as many of these chiefs of diversified companies are happy managing unregulated energy businesses, they have no intentions of leaving their regulated utility roots.</p>
<p>“For us, the utility is a foundational business,” Warren says. “Overall, one of the things the utility has done is that it has kept us in touch with the fundamentals of the natural-gas market. On one side of your business you are interfacing with industrial, commercial, and residential customers. You know a lot about supply and demand from that side. And that knowledge is helpful as we think about the future on the oil and gas side as well.”</p>
<p>Edison International’s Bryson likes the hybrid model, echoing Warren’s view on the gas side. “We like that. We think it is a considerable strength that we encompass in the company—strong regulated and strong competitive business lines in electricity. That gives us an understanding of the total electricity business and the total electricity market that is deep and valuable.”</p>
<h4>The King of Energy</h4>
<p>Some may be surprised that one company has held the top spot on the <em>F40</em> for two years in a row. But a close look at Kinder Morgan shows a company aggressive (some say driven) in rooting out all forms of inefficient allocation of resources.</p>
<p>Kinder Morgan’s Shaper, in explaining his company’s ethos, makes it sound like a motto: “We are not interested in spending any money that does not further our effort to increase cash flows out of our assets.”</p>
<p>He and his company have been quite serious about extending this ethos to corporate management. “This has been discussed about us before. Rich Kinder earns $1 per year. He takes no bonus, no options, no restricted stock, and no other form of compensation. Our management salaries have a cap of $200,000 per year. We do not advertise. We don’t name stadiums. We don’t fly first class or own corporate air craft.” Furthermore, this tight discipline on expenses not only is observed in the C-suite, but even in the development of new projects.</p>
<p>Shaper says that the master limited partenership (MLP) structure imposes a stricter discipline on Kinder Morgan Energy Partners (KMP) than on other companies.</p>
<p>KMP is obligated to return its cash that it generates to its partners. Shaper says that this obligation puts management’s focus on generating cash and earning a return on that cash for investors. But because the MLP distributes all of its available cash to investors, when KMP want to make an investment, the company must go back to those investors and make a convincing case.</p>
<p>“We have to go back to investors, and say essentially, ‘Hey, we want to make another investment. This is what the investment is. This is how much it will cost. This is the return that we expect it to generate. Won’t you please give us the capital to do it?’” says Shaper. He believes this requires a much different discipline than management teams that retain cash for new investment.</p>
<p>“I think that that discipline, that requirement to go and raise capital for your investments leads to better investments, because you only do it when you are convinced that you are actually going to earn a reasonable return,” he says.</p>
<p>The company does have a few attractive projects in the pipeline that may keep it in the upper ranks of the F40 for some years to come. Even if the management buyout of Kinder Morgan Inc. would occur, which had not been decided by the company’s board of directors at press time, KMP still would remain a public company and be traded on the New York Stock Exchange.</p>
<p>“Looking forward, we are going to get some tremendous growth from some of these natural-gas pipeline expansions. Rockies Express being the largest, it’s over $4.4 billion dollars in total investment, and we will be owning about half of that. It is a fully subscribed project (1.8 bcf per day) running from Colorado ultimately all the way to the Eastern edge of Ohio. That will drive tremendous growth,” he says.</p>
<p>Then there is the Louisiana pipeline, which will connect to some LNG facilities in Texas and Louisiana, and which the company believes will grow earnings significantly.</p>
<p>But will the earnings be enough to retain the top spot in 2007? We won’t bet against Kinder Morgan. But C Three’s Rollins points out that many companies that endured heavy losses from the merchant meltdown will have worked off all of their losses by 2007.</p>
<p>Just look at TXU, Rollins says. It rocketed to the top tier of the list because it rolled off its last bad year in the three-year time frame. Companies like AEP also may make strong showings in next year’s F40, she says.</p>
<p>Who might be the winner next year? Accenture’s Hendrickson and C Three’s Rollins won’t hazard a guess. But they agree that possessing sufficient, flexible, and low-cost source supply will be a powerful predictor of leadership. Watch these pages to see who makes next year’s <em>Fortnightly 40</em>.</p>
</div></div></div><div class="field-collection-container clearfix"><div class="field field-name-field-sidebar field-type-field-collection field-label-above"><div class="field-label">Sidebar:&nbsp;</div><div class="field-items"><div class="field-item even"><div class="field-collection-view clearfix view-mode-full"><div class="entity entity-field-collection-item field-collection-item-field-sidebar clearfix">
<div class="content">
<div class="field field-name-field-sidebar-title field-type-text field-label-above"><div class="field-label">Sidebar Title:&nbsp;</div><div class="field-items"><div class="field-item even">The Performance Standard</div></div></div><div class="field field-name-field-sidebar-body field-type-text-long field-label-above"><div class="field-label">Sidebar Body:&nbsp;</div><div class="field-items"><div class="field-item even"><!--smart_paging_autop_filter--><!--smart_paging_filter--><h4>The story of the Fortnightly 40’s development.</h4><h6>By Richard Stavros</h6><p>Various equity research analysts and Wall Street bankers often have pointed out that more than three quarters of a typical utility’s valuation can be attributed to interest rates, dividend policy, and the company’s regulatory environment. Furthermore, Mother Nature has on occasion been known to have an even greater influence on quarterly or even annual corporate results. That is why an effective industry benchmark must filter out what is beyond management’s control. That is why many energy executives believe there long has been a need for a performance standard that filters out the short-term volatility of the market and other factors, and takes into account more precisely management’s contribution to the business over time. This is why the Fortnightly 40 chose to rank companies on performance over a three-year period. That way short-term price fluctuations in stocks, commodities, weather, and even impacts of regulatory decisions can to a great degree be factored out.</p><h4>At Heart: A DuPont Hybrid Model</h4><p>The core of the benchmark used to develop the Fortnightly 40 is called a hybrid DuPont Model or DuPont Hybrid. It is based on the 80-year old DuPont model that has been growing in favor with the energy finance set, as it can include a series of growth measures that they say makes the model more effective in the 21st century. Developed originally in 1919 by a finance executive at E.I. du Pont de Nemours and Co., of Wilmington, Del., the DuPont system of financial analysis is used by many asset-intensive industries to evaluate and visualize the critical building that contributes to return on equity and hence shareholder value. The DuPont model uses certain inputs such as sales, cost of sales, fixed assets, and current assets. At successive stages they are added, subtracted, divided, or multiplied until return on equity is reached. The model forms an easy to use and understandable framework with which to investigate the root cause of increasing or declining value. Furthermore, the model can be instructive on ways to increase return on investment: increase sales—either by increasing the price or by selling more units—or decrease cost of sales, fixed assets, and current assets. That is why, within asset-intensive businesses, such as utilities, the model has particular significance.</p><p>But after decades of use, many in the finance industry gravitated to more complex modeling techniques with growth measures. For example, the most well known of these is the famed Stern Stewart &amp; Co. economic value added (EVA) framework. EVA won popularity in corporate circles by correlating favorable results with decisions that produce returns that exceed the cost of capital—a formula for creating shareholder value. Furthermore, proponents of EVA say the DuPont model is flawed in that there is inherent guesswork in generally accepted accounting principles that creates room for shortsighted decisions. But many academics say they disagree that the DuPont model significantly is more vulnerable to manipulation than newer methods. They add that valuations by rival methodologies based on EVA also can involve subjective guessing because cash flows must be estimated in the future. Furthermore, many of the other bells-and-whistles methods involve a significant number of calculations and create opportunities for manipulation, say proponents of DuPont modeling. On the other hand, critics of the old DuPont model also say the model fails to predict future earnings or track costs.</p><p>This explains why the reemergence of the DuPont model comes from financial executives who have found new value in adding growth measures to return on investment calculations. Of course, there never will be a performance benchmark that pleases everyone all the time. And many finance executives say that the decision to use the DuPont method or a version of EVA mostly can be attributed to personal preference or corporate culture. Furthermore, many energy finance executives say they use such models in tandem to achieve the most comprehensive results. (On p. 52 of this issue, Accenture performs its own shareholder value analysis [SVA] of the energy industry.) We believe that both results, while different, offer valuable insights in to the corporate management of the utility industry.</p><h4>Sustainable Growth Predictions: More Art Than Science?</h4><p>The DuPont sustainable growth rate used in our calculations has its critics. Fortnightly acknowledges there can be limitations to the ROE analysis, such that it is susceptible to variability in dividend payout, interest expense, and business cycles. Also sustainable growth measures can be affected by consolidated versus segment reporting, accounting issues, interest expense, structural change and the impacts of industry competitiveness. But other growth models have been found to lack consensus among those in the industry, and have their own sets of problems in application. Moreover, many of our finance experts find some of the issues with the DuPont sustainable growth rate are rendered moot in combination with the larger model characteristics of the Fortnightly 40.</p><p>C. Park Shaper, president of two-time winner Kinder Morgan Inc., offers his opinion on the sustainable growth quotient in the Fortnightly 40 model.</p><p>“The truth is, as long as you do everybody the same on those metrics, I don’t think it matters. I think the way that you’ve selected it is the easiest way to do it—the same for everybody. On your growth measure, I think it would be interesting. Sustainable growth implies what is going to happen in the future. This gets a little bit more subjective. [But] there’s not really an objective way to estimate that,” he says.</p><p>Shaper notes that the DuPont sustainable growth-rate calculation assumes a company must reinvest in order to grow. “I think that’s true for a lot of entities.”</p><p>Naturally, he says, it always is going to be awkward to put all companies in the same position. “You have to make some assumptions and simplify some things. I think what you have started off with is great, and I’m sure you’ll continue to make it better. My guess is you’ll find some things that you say, hey, this is imprecise in our model but there is just nothing that you can do about it,” he explains.</p><p>The Fortnightly editors welcome further discussion and insight that put the F40’s methodology in an even more proper context. We invite industry-wide feedback on how to improve the model further.–<span><span class="bolditalic">RS</span></span></p><h4>Credits</h4><p>Special thanks to Jim Hendrickson, lead partner for the North American Utilities Strategy practice at Accenture, the Fortnightly 40’s official sponsor. Special thanks also go to Jean Reaves Rollins, managing partner, the C Three Group LLC, the Fortnightly 40’s exclusive financial data provider. Finally, we are grateful to the many Wall Street experts and utility CFOs who anonymously have offered their expertise and insights on constantly refining the Fortnightly 40—the new standard of excellence in the energy industry.</p></div></div></div> </div>
</div>
</div></div><div class="field-item odd"><div class="field-collection-view clearfix view-mode-full field-collection-view-final"><div class="entity entity-field-collection-item field-collection-item-field-sidebar clearfix">
<div class="content">
<div class="field field-name-field-sidebar-title field-type-text field-label-above"><div class="field-label">Sidebar Title:&nbsp;</div><div class="field-items"><div class="field-item even">The Fortnightly 40 &amp;ndash; Model Characteristics</div></div></div><div class="field field-name-field-sidebar-body field-type-text-long field-label-above"><div class="field-label">Sidebar Body:&nbsp;</div><div class="field-items"><div class="field-item even"><!--smart_paging_autop_filter--><!--smart_paging_filter--><p><strong>Time Frame: </strong>3-year average.</p><p><strong>Stock Price Analysis: </strong>3-year average.</p><p><strong>Universe: </strong>100 largest investor-owned power and gas utilities and natural gas pipeline companies.</p><p><strong>Components:</strong></p><p><strong>1. Profitability</strong> = Margin = Net Income/Total Revenues.</p><p><strong>2. Dividend Yield</strong> = Annual Declared Dividends/Year-End Stock Price.</p><p><strong>3. Free Cash Flow</strong> = (Operating Cash Flow – Capital Expenditures)/Total Revenues.</p><p><strong>4. DuPont ROE 5 Ratio Model:</strong></p><p>a. Earnings after taxes (EAT) = Net Income;</p><p>b. Earnings before taxes (EBT) = Net Income + Income Taxes;</p><p>c. Earning before interest and taxes = Net Income = Income Taxes + Interest;</p><p>d. Revenues = Total Revenues;</p><p>e. Assets = Total Assets; and</p><p>f. Equity = Total Common Shareholders Equity. DuPont ROE = (EAT/EBT)* (EBT/EBIT)*(EBIT/Revenues)* (Revenues/Assets)* (Assets/Equity).</p><p><strong>5. DuPont ROA</strong> = (EAT/Revenue)*(Revenue/Assets).</p><p><strong>6. Sustainable Growth</strong> = DuPont ROE*(1-Dividend Payout Ratios).</p><p><strong>7. Fortnightly Index</strong> Each company was force-ranked on the above measures from 1 through 100, with 1 being the highest ranking. Each measure was weighted equally. The six measures then were averaged, with the highest average given a ranking of 1 and the lowest, 100.</p><p><strong>8. Companies excluded:</strong></p><p>a. Companies that had a negative shareholder equity value during any of the three years in the analysis were excluded (mathematically, the DuPont model cannot contemplate a negative shareholder value). These include Mirant and Northwestern.</p><p>b. Companies that reported net losses for at least two of the three years in the time frame of the analysis: These include:</p><p>•Allegheny Energy</p><p>•Aquila</p><p>•CMS</p><p>•Dynegy</p><p>•Energy West</p><p>•El Paso</p><p>•Reliant Resources</p><p>•Semco Energy</p><p>•Teco Energy</p><p><strong>Editor’s Note:</strong> The financial model, underlying assumptions, and performance criteria of the <em>Fortnightly 40</em> financial rankings are the sole intellectual property of <em>Public Utilities Fortnightly</em> and its holding company, Public Utilities Reports Inc. Any attempt to reproduce, copy, modify, alter, or use the Fortnightly 40 financial model without the express permission of the publisher will be prosecuted.</p></div></div></div> </div>
</div>
</div></div></div></div></div><div class="field field-name-field-article-category field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Category (Actual): </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/article-categories/fortnightly-40-index">Fortnightly 40 Index</a></li></ul></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-image-picture field-type-image field-label-above"><div class="field-label">Image Picture:&nbsp;</div><div class="field-items"><div class="field-item even"><img src="http://www.fortnightly.com/sites/default/files/0609-FEA1.jpg" width="1121" height="1500" alt="" /></div></div></div><div class="field field-name-field-fortnightly-40 field-type-list-boolean field-label-above"><div class="field-label">Is Fortnightly 40?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-law-lawyers field-type-list-boolean field-label-above"><div class="field-label">Is Law &amp; Lawyers:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/accenture">Accenture</a><span class="pur_comma">, </span><a href="/tags/aep">AEP</a><span class="pur_comma">, </span><a href="/tags/bankruptcy">bankruptcy</a><span class="pur_comma">, </span><a href="/tags/boeing">Boeing</a><span class="pur_comma">, </span><a href="/tags/c-three-group">C Three Group</a><span class="pur_comma">, </span><a href="/tags/cash-flow">cash flow</a><span class="pur_comma">, </span><a href="/tags/dc">DC</a><span class="pur_comma">, </span><a href="/tags/dividend-yield">dividend yield</a><span class="pur_comma">, </span><a href="/tags/edison-international">Edison International</a><span class="pur_comma">, </span><a href="/tags/energen">Energen</a><span class="pur_comma">, </span><a href="/tags/kinder-morgan-energy">Kinder Morgan Energy</a><span class="pur_comma">, </span><a href="/tags/kinder-morgan-energy-partners">Kinder Morgan Energy Partners</a><span class="pur_comma">, </span><a href="/tags/mlp">MLP</a><span class="pur_comma">, </span><a href="/tags/questar">Questar</a><span class="pur_comma">, </span><a href="/tags/strategy">Strategy</a><span class="pur_comma">, </span><a href="/tags/wgl-holdings">WGL Holdings</a> </div>
</div>
Fri, 01 Sep 2006 04:00:00 +0000puradmin14343 at http://www.fortnightly.comPerspectivehttp://www.fortnightly.com/fortnightly/2003/10-0/perspective
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>New realities demand new direction from utilities.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Timothy F. Sutherland and Gary Vicinus</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - October 15 2003</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><blockquote><h1 class="dept">Perspective</h1>
<h3>New realities demand new direction from utilities.</h3>
<p> </p>
</p>
<p>To paraphrase Shakespeare, "The true soul of joy is in the process." For the utility industry, nothing could be further from the truth. The deregulatory "process" has not been joyful. It has been painful and costly. Perhaps equally disturbing, the process has compromised the reliability of the utility industry and has placed in question the judgment of its leadership, all of which is particularly troubling for an industry where "reliability" and "trusted leadership" have been widely regarded as the industry's hallmark characteristics.</p>
<p>Although operating reserve margins were once an indicator of reliability, undercapitalized entrepreneurs now frequently own generating capacity. The industry's transmission system, which has always been an invisible, dependable network of arteries for reliable supply, now experiences blockages and hemorrhages symptomatic of bigger problems facing us tomorrow. Where stable dividends were reflections of trusted leadership, bankruptcy and restructuring concerns now overshadow the public confidence. The failures have been well documented: California, recent blackouts, Enron, PG&amp;E, AES, Mirant, and LG&amp;E Trading. The list goes on and on.</p>
<p>These changes prompt one to wonder what happened to our leadership. We cannot minimize the incredible structural changes that have occurred in the utility field since 1992. The traditional vertically integrated structure of 1992 was dismantled in large measure by regulatory design. But the reformatting of the industry also was accelerated and thrown off course as entrepreneurs of every form descended with visions of fast money. They came with trading schemes for marketing and sales schemes for aggregating customers. They also came with leveraged financing schemes for locating generating assets almost anywhere a pipeline and a transmission line intersected.</p>
<p>The leadership also participated in what had to appear as a random shuffling of industry business segments as mergers took place, unregulated subsidiaries sprouted, and utility holding companies came back into vogue. Did they join in a popular trend? They did. The truth is they had little choice. Their traditional industry and customer base were being cannibalized and, rightly or wrongly, participation in the trend was a form of self-defense.</p>
<p>The failure of the merchant generation business in 2001 was merely the latest in a series of failed business strategies by the industry since 1993. As shown in Figure 1, by 1992, most utilities were integrated utility systems. Earnings were stable and reliable. With wholesale power deregulation followed by retail choice, many utilities were forced to divest assets in many states and develop new business paradigms. Between 1993 and 2001, utilities tried a number of growth strategies, ranging from: (a) consolidation, through mergers and acquisitions; (b) diversification into cable, telecommunications, water, merchant power, and engineering services; (c) regional trading; and (d) divestiture and reaggregation.</p>
<p>The few success stories during this period centered on claims of avoiding major mistakes and not in celebrating returns of a scaleable and sustainable business model.</p>
<p>Sustaining valuation during this period, in and of itself, was a major task. Figure 2 offers a selective but instructive snapshot of a troubled period where volatile earnings and stock valuations prevailed. Yet, during this period, some utilities maintained a recipe for stability and appeared to execute prudent corporate strategies that allowed for stable value (Southern, Exelon, Dominion, and Con Ed), while others such as PG&amp;E, Allegheny, Dynegy, and AES, to mention only a few, faltered. The dichotomy of performance during this period raises questions of both strategic conduct and also of leadership.</p>
<p>During this period, executives from outside the utility industry replaced a number of CEOs. The prevailing view was that utility deregulation required leadership that was accustomed to the competitive environment. The rush to outside "experts" proved flawed. These outsiders were more accustomed to a non-utility environment and failed to be respectful of the utility segment's roots and core strengths: (a) its commitment to serve its regulated customers; (b) its expectation of stable earnings; and (c) the importance of working with, and not circumventing, the regulatory process.</p>
<p>In Jim Collin's Good to Great, he notes that one of the most damaging trends in recent history is the tendency (especially by boards of directors) to select dazzling, celebrity leaders and to de-select potential outstanding leaders from within. Collins identifies companies that had cumulative returns at least three times the market over a 15-year period.<sup>1</sup> Of those select companies, only one sought a CEO from the outside. Many of the characteristics Jim Collins attributes to outstanding leadership are strikingly similar characteristics to what we now view as the former utility CEO.</p>
<p>Those selected as the "Best of the Best" CEOs by in 2003 did not include a single CEO who came from outside the industry. Allen Franklin of Southern Co. was previously president and CEO of Georgia Power and Southern Co. Services. John Rowe of Exelon was previously president and CEO of Unicom Corp., Commonwealth Edison, and Central Maine Power. Thomas Capps of Dominion Power was previously counsel to CP&amp;L and Boston Edison, and he then joined Virginia Power. Linn Draper of AEP was previously chairman of Gulf States Utilities. Eugene McGrath of Con Ed worked his way up the ladder internally. Each had firm roots in the regulated utility industry. It should not go unnoticed that these executives also match those utilities listed in Figure 2 as having achieved stable market valuations during perhaps the most volatile period in the industry.</p>
<p>Each CEO adopted a philosophy built around its core businesses, but the market structure is changing again and presenting new challenges to industry leaders. Further consolidation will occur, and ISOs and RTOs will characterize our markets. Transmission companies will prevail, FERC's standard market design will materialize in some form, and spot market transparency will happen as "day-ahead" and "hour-ahead" price discovery features prevail.</p>
<p>This time around, the electric utility industry is moving toward a formula that holds promise. Many in the industry are adopting a "back-to-basics" strategy for prudent long-term growth.</p>
<p>The new utility model for leadership:</p>
<ul>
<li>displays a workmanlike diligence, or is "more plow horse than show horse";</li>
<li>is not hesitant to restore strong fiscal management; and</li>
<li>demands implementation of a business model founded primarily on earnings from the utility practice and augmented by earnings from non-regulated business ventures.</li>
</ul>
<p>It will be the only way to realize anything close to a Shakespearian experience.</p>
<p><b></b></p>
<ol>
<li>Collins picked three times the market because it exceeds the performance of most widely acknowledged great companies. For perspective, a mutual fund of the following "marquis set" of companies beat the market by only 2.5 times over the years 1985 to 2000: 3M,Boeing, Coca-Cola, GE, Hewlett-Packard, Intel, Johnson &amp;Johnson, Merck, Motorola, Pepsi, Procter &amp; Gamble, Wal-Mart, and Walt Disney. Not a bad set to beat as Mr. Collins points out.</li>
</ol>
<hr />
<p><b>Articles found on this page are available to subscribers only. For more information about obtaining a username and password, please call our Customer Service Department at 1-800-368-5001.</b></p>
</blockquote>
</div></div></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-department field-type-taxonomy-term-reference field-label-above clearfix"><h3 class="field-label">Department: </h3><ul class="links"><li class="taxonomy-term-reference-0"><a href="/department/perspective">Perspective</a></li></ul></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/aep">AEP</a><span class="pur_comma">, </span><a href="/tags/aes">AES</a><span class="pur_comma">, </span><a href="/tags/bankruptcy">bankruptcy</a><span class="pur_comma">, </span><a href="/tags/boeing">Boeing</a><span class="pur_comma">, </span><a href="/tags/central-maine-power">Central Maine Power</a><span class="pur_comma">, </span><a href="/tags/coca-cola">Coca-Cola</a><span class="pur_comma">, </span><a href="/tags/dominion">Dominion</a><span class="pur_comma">, </span><a href="/tags/dynegy">Dynegy</a><span class="pur_comma">, </span><a href="/tags/exelon">Exelon</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a><span class="pur_comma">, </span><a href="/tags/ge">GE</a><span class="pur_comma">, </span><a href="/tags/georgia-power">Georgia Power</a><span class="pur_comma">, </span><a href="/tags/iso">ISO</a><span class="pur_comma">, </span><a href="/tags/john-rowe">John Rowe</a><span class="pur_comma">, </span><a href="/tags/rto">RTO</a><span class="pur_comma">, </span><a href="/tags/transmission">Transmission</a><span class="pur_comma">, </span><a href="/tags/wal-mart">Wal-Mart</a> </div>
</div>
Wed, 15 Oct 2003 04:00:00 +0000puradmin11320 at http://www.fortnightly.comGeneration Assets: How to Derive Greater Valuehttp://www.fortnightly.com/fortnightly/2002/12/generation-assets-how-derive-greater-value
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Learning from Wal-Mart.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Christopher A. Grier</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - December 2002</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><blockquote>
<h3>Learning from Wal-Mart.</h3>
<p><b class="hook">It's bad enough that merchant generating</b> companies are struggling under the weight of regulatory, accounting, and public scrutiny in an era of shattered shareholder confidence. To make things worse, over the past few years generation was overbuilt on speculation that sparks spreads would be maintained and the economy would grow. But sparks spreads have shrunk, and given the national economic downturn, energy use is also down. This comes at a time when generating companies are straddling the regulated and non-regulated worlds. Generating companies continue to have a tremendous amount of regulated governance-if not in reality, certainly in their struggle to discard a cost-of-service mentality. Realistically, these companies should be working within a commodity business model, but instead find themselves still operating like regulated entities in many of their business decisions. Most of these companies primarily make electricity-a commodity product (notwithstanding potential ancillary services). But most are not yet adept at driving down costs while building in efficiencies. Yet Wall Street, customers, regulators, and the public all expect generators to be competitive and to deliver solid business performance.</p>
<p>Moreover, even if assets are still regulated, companies find themselves subject to a rate freeze-either self-imposed or the result of a negotiated rate settlement. Or perhaps their public utility commission recognized the need to act as a substitute for an unregulated market. Whatever the origin, the drive to cut costs and live under rate caps is accelerating. Companies are faced with a new reality: To capture additional business value by optimizing all of their assets.</p>
<h3>Identifying a Better Business Model</h3>
<p>Taking all of this to heart, generating companies now recognize they are faced with some make-or-break decisions about how to create significant value from their assets-regulated and non-regulated-in order to satisfy all of their stakeholders. Defined in the simplest terms, they are looking for ways to make electricity at the service and quality level that customers expect, while also continually finding ways to reduce the incremental cost of production. Because they are now producing a true commodity, they will have to figure out how to maintain costs (or even lower them) while increasing operating flexibility and reliability to keep customers satisfied. In fact, generating companies would do well to become more like Wal-Mart-or Home Depot, Boeing, or McDonald's. Does that sound like a very big stretch? Probably. But Wal-Mart excels because it continually figures out how to improve efficiency and be more effective in running and stocking its stores, working with suppliers, and serving its customers. Wal-Mart doesn't gold-plate anything; it develops and operates facilities to sell products to specifically meet customers' needs. And it does that extremely well. In effect, Wal-Mart keeps growing because it knows how to optimize all of its assets while increasing customer satisfaction.</p>
<p>The successful business model for the generating business going forward is not very different from the model Wal-Mart uses. To satisfy all of their stakeholders, companies must learn how to:</p>
</p>
<ul>
<li>Optimize the production of a commodity, , increase capacity, commercial availability, and efficiency;</li>
<li>Meet the service level and quality expectations of customers, , flexibility and reliability as defined by wholesale marketers and energy traders; and</li>
<li>Do the above while continually reducing cost.</li>
</ul>
<p>In essence, they must ensure that their portfolio of production assets can be maintained and optimized for their usefulness over time-namely, asset optimization. As asset optimization becomes a core competency (the way it is at Wal-Mart or Home Depot), a company is able to accelerate its ability to capture and grow value. The best approach to asset optimization in the generating business involves deriving more value from existing physical and intellectual assets-beginning by identifying areas for potential change, improvement, and optimization, top-down and bottom-up. A company can start by examining all of its assets (whether transmission, distribution, power procurement, customer management, or other assets) along four dimensions:</p>
</p>
<ul>
<li><b>Decision Support Systems and Information</b>-Compile, analyze, and report data and information that can be used by management as knowledge to increase efficiency and quality of decisions. -making the best decisions on capital and O&amp;M resource allocation or operating and maintenance strategies.</li>
<li><b>Process Improvements</b>-Change existing processes or supporting systems to increase effectiveness and efficiency of the physical and intellectual assets (including the organization). -increasing worker "wrench time" or improving procurement of consumables.</li>
<li><b>New Products or Services</b>-Increase existing asset utilization; generate incremental revenues. -utilizing a digital control system to vastly improve ramp rates, allowing entry into load-following energy markets.</li>
<li><b>Risk Management</b>-Identify, control, and mitigate business uncertainty attributable to an activity; provide information and guidance on how uncertainty influences the three previous dimensions. -identifying the potential operational risk benefit of a shift to reliability-centered maintenance.</li>
</ul>
<p><b>Articles found on this page are available to Internet subscribers only. For more information about obtaining a username and password, please call our Customer Service Department at 1-800-368-5001.</b></p>
</blockquote>
</div></div></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/boeing">Boeing</a><span class="pur_comma">, </span><a href="/tags/wal-mart">Wal-Mart</a> </div>
</div>
Sun, 01 Dec 2002 05:00:00 +0000puradmin11533 at http://www.fortnightly.comSpecial Reporthttp://www.fortnightly.com/fortnightly/2001/11/special-report
<div class="field field-name-field-import-deck field-type-text-long field-label-inline clearfix"><div class="field-label">Deck:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Industry hopes its centralized assets aren&#039;t in the crosshairs.</p>
</div></div></div><div class="field field-name-field-import-byline field-type-text-long field-label-inline clearfix"><div class="field-label">Byline:&nbsp;</div><div class="field-items"><div class="field-item even"><p>Richard Stavros</p>
</div></div></div><div class="field field-name-field-import-volume field-type-node-reference field-label-inline clearfix"><div class="field-label">Magazine Volume:&nbsp;</div><div class="field-items"><div class="field-item even">Fortnightly Magazine - November 1 2001</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><blockquote><p></p>
</p>
<p> </p>
<h3>Industry hopes its centralized assets aren't in the crosshairs.</h3>
<p> <b>When the topic of U.S. energy security comes up, OPEC typically springs to mind.</b> Sure enough, following the Sept. 11 attacks on the World Trade Center and Pentagon, politicians and energy executives quickly rallied before the public for less reliance on oil supply from OPEC member nations, and for bolstering domestic energy production. </p>
<p>Some politicians saw the timing as perfect to promote the Bush administration's agenda to open environmentally sensitive areas-including the Arctic National Wildlife Refuge (ANWR) in Alaska-to oil and gas production. They pointed to the fact that, as of this past summer, the United States relied on imports for 57 percent of its oil supplies, and that 25 percent of these imports came from the Persian Gulf. Saudi Arabia, whose oil accounts for 14.5 percent of U.S. imports, could face instability from militants angry over U.S. military attacks on fellow Muslim countries, thereby jeopardizing U.S. access to oil in the country. </p>
<p>At the same time, other Republican backers of opening ANWR to production, most notably Sen. Frank Murkowski, R-Alaska, showed restraint, stating that the time was not appropriate to advance the ANWR issue, given the circumstances in New York and Washington, D.C. Some industry executives also backed away from commenting on the ANWR controversy, fearing they would be viewed as opportunists. </p>
<h3>Consensus on Safeguards </h3>
<p>While timing appears to be a divisive issue among interested parties on ANWR, another energy security provision-safeguarding the nation's existing energy infrastructure-has received almost unanimous support inside the Beltway.</p>
<p> Immediately after the attacks, electric utilities implemented emergency plans to protect transmission lines and generating stations, particularly nuclear power plants. The North American Electric Reliability Council (NERC) ordered utilities to implement emergency procedures. At the same time, Energy Secretary Spencer Abraham placed the energy industry on condition 2 alert, second only to condition 1, forcing plants and pipelines to tighten their security. </p>
<p>Preparation work two years earlier for the Year 2000 computer bug came in handy as electric utilities, in the Sept. 11 aftermath, sought to assess their infrastructure from top to bottom. The Edison Electric Institute (EEI) said its utility members had an easier time reviewing physical conditions of their electric transmission grids, as well as generating assets, because of the Y2K measures. </p>
<p>While preparing their systems for Y2K, the utilities developed procedures for locating and correcting disturbances throughout their systems. Equally important, during the Y2K preparations, the energy industry had formed strong ties with government agencies.</p>
<p> In the wake of the attacks, EEI convened a task force of utility chief executives to assess protection for transmission lines and key facilities. The association held an initial task force meeting one week after the attacks, bringing together 25 top utility CEOs from across the country. </p>
<p>"They decided to reinstate our Y2K network of information sharing," EEI spokesperson Jayne Brady says. Along with scrutinizing every detail of their operations, utilities also are "beefing up current security practices." She emphasizes, though, that while utilities have considerable experience dealing with natural disasters such as hurricanes and winter storms, there have been minimal cases of domestic terrorist incidents. </p>
<p>The Y2K preparations were "a very good exercise," NERC's media relations manager Ellen Vancko says. "A lot of that coordination is still in place." </p>
<h3>Airliners vs. Nukes </h3>
<p>For utilities that operate nuclear plants, industry officials have said there may be no defense against the kind of attacks that occurred Sept. 11. The Nuclear Regulatory Commission (NRC) said that nuclear power plants have "robust containment buildings" designed to withstand extreme events such as hurricanes, tornadoes, and earthquakes. </p>
<p>"However, the NRC did not specifically contemplate attacks by aircraft such as Boeing 757s or 767s and nuclear power plants were not designed to withstand such crashes," the NRC said in a statement. "Detailed engineering analyses of a large airliner crash have not yet been performed." </p>
<p>The NRC did assure that an airliner crash into a nuclear plant, spent fuel dry storage cask, or spent fuel transportation cask would not trigger a nuclear explosion. Regulators also require nuclear plant licensees to implement security programs that include well-armed civilian guard forces and physical barriers. </p>
<p>The Nuclear Energy Institute (NEI), a lobbyist for the nuclear industry, commented after the attacks that reactor containment buildings are designed to withstand the impact of airborne objects up to a certain force. "Design requirements with respect to aircraft impacts are specific to each facility," NEI says. </p>
<p>Entergy, operator of nine nuclear reactors in its South and Northeast divisions, responded immediately to the potential threat by limiting access at certain nuclear plant facilities to only one highway checkpoint instead of multiple entrances to the plants. While security is always tight, Entergy now is inspecting all packages, however harmless appearing, that enter its nuclear facilities. </p>
<p>As for those who fear nuclear plants would pose a grave danger if targeted by an airliner, "We are not speculating on 'what if?' scenarios because it could expose particular vulnerabilities," Entergy's Diane Park, manager of corporate communications for Entergy Nuclear South, says. </p>
<p>Entergy also trusts the attacks will not soften President Bush's commitment to keeping nuclear power a viable part of the energy supply mix. "Do we stop building skyscrapers because of the threat?" Park asks. </p>
<h3>Lessons Learned at Ground Zero </h3>
<p>During EEI's task force meeting, Eugene McGrath, chairman, president, and chief executive of Consolidated Edison of New York-the electric utility at ground zero of the World Trade Center attack, which has worked continuously to rewire large portions of lower Manhattan-strongly urged other utility companies to test emergency plans in their own communities, advice that was readily heeded by fellow utility executives, EEI's Brady says. </p>
<p>Con Edison was fortunate because it had redundant communication systems, such as its cache of BlackBerry mobile email systems that allowed it to overcome the disruption in telephone and mobile phone usage in New York City. The utility also had trained emergency staffers who were able to begin repair work immediately on damaged infrastructure in the ground zero area because they had a supply of respirator suits for its employees to wear. </p>
<p>As director of the energy industry's overall efforts, the Department of Energy has been in regular communication with the National Infrastructure Protection Center (NIPC), a department created in 1997 by President Clinton and located at the Federal Bureau of Investigation (FBI) headquarters in Washington. The center monitors threats and attacks against critical industrial infrastructure in the United States, including energy, telecommunications, and banking and finance. </p>
<p>In its response, the Federal Energy Regulatory Commission (FERC) issued a statement alerting energy companies that it would allow them to recover costs associated with beefing up security at their facilities. </p>
<p>"The commission is aware that electric, gas, and oil companies may need to adopt and/or update procedures and install facilities that further safeguard electric power grids and natural gas pipeline systems," FERC said in a statement. The commission said it's committed to expediting the processing on a priority basis any application that would "specifically recover such costs from wholesale customers." FERC said companies also can propose a separate rate recovery mechanism, such as a surcharge over currently existing rates or some other cost recovery method. </p>
<p><b>The FBI Connection </b></p>
<p>Vancko says her organization has been in almost daily contact with the FBI to ensure proper security measures are being followed. "We've had direct contact with the federal government and our security coordinators," she said. </p>
<p>Each of the 21 NERC regions employs its own security officer who is responsible for ensuring proper measures are being taken by member energy companies. Some regions have a large nuclear reactor presence while security coordinators in other regions such as the Pacific Northwest must watch over hydroelectric assets. Each region has different factors on which security is based, Vancko says. </p>
<p>In June, three months before the attacks in New York and Washington, NERC issued a study on protecting electricity industry infrastructure. The council offered a quote at the beginning of the study from a book entitled with a refrain that rings similar to comments of pundits who compared the Sept. 11 actions to the Japanese raid of Dec. 7, 1941. "Whether at Pearl Harbor or at the Berlin Wall, surprise is everything involved in a government's (or in an alliance's) failure to anticipate effectively," the quote reads. </p>
<p>In the study, "An Approach to Action for the Electricity Sector," NERC noted that recent requests for security funding often had been met with the rhetorical management question: "Nothing has ever happened, so why spend money on security?" NERC responded that much has happened, including computer intrusions, sabotage, vandalism, and plots to disable towers and substations, although not on the scale of what occurred to Con Edison's infrastructure on Sept. 11. </p>
<table width="100%" border="0">
<tr bgcolor="336699">
<td>
<h2><font color="#FFFFFF">Nuclear Plant Self-policing Found Suspect</font></h2>
</td>
</tr>
<tr bgcolor="99ccff">
<td>
<p> The nuclear industry's move toward self-regulation of security at its power plants hit a major pothole in the wake of the attacks on the World Trade Center and Pentagon. </p>
<p>The Nuclear Energy Institute (NEI), the lobbying arm for the nuclear power industry, has worked with the Nuclear Regulatory Commission (NRC) to implement the safeguards performance assessment (SPA) program, a process that involves nuclear plant operators conducting "full-scale, force-on-force exercises" on their own with less direct NRC involvement. Currently, the NRC uses its own staff to oversee security through its operational safeguards response evaluation (OSRE), which measures the ability of nuclear power plants to protect against attacks aimed at causing radiological sabotage. </p>
<p>The SPA pilot was scheduled to kick off in September, with the Palo Verde nuclear generating facility as the first participant. Arizona Public Service, operator of Palo Verde and a subsidiary of Pinnacle West, had decided to postpone its involvement in the program a week prior to the Sept. 11 attacks. The company now is penciled in as the second participant in the pilot, starting in January, behind TXU Electric's Comanche Peak nuclear plant, southeast of Dallas. </p>
<p>Comanche Peak was selected to implement the SPA program starting in November, but the company could not guarantee its participation would begin as scheduled in the light of the attacks. "The drill date is very tentative at this point," TXU spokesman Rand LaVonn says. </p>
<p>"SPA is an effort to show that utilities can carry out these drills on their own and do a very good job," LaVonn explains. Comanche Peak always has been ranked as one of the most secure nuclear plants in the country and that's probably why it was chosen for the pilot program, he adds. </p>
<p>In announcing the pilot this past summer, the NRC said the SPA program is part of ongoing efforts to identify more efficient and effective ways to assess security at nuclear power plants. </p>
<p>As federal regulators have moved to allow the nuclear power industry to police itself, serious breaches in plant safety still are taking place, according to an NRC security expert. In an assessment of nuclear plant safety, released in 1999, David Orrik, a retired naval officer and security specialist at the NRC, charges cutbacks in direct federal oversight of nuclear plant safety could have devastating effects if a reactor was the target of sabotage. </p>
<p>In his "Differing Professional Opinion" assessment submitted to the NRC's executive director for operations, Orrik notes that through the NRC's OSRE program, significant weaknesses were identified in 27 of the 57 plants that had been evaluated as of February 1999. "'Significant' here means that a real attack would have put the nuclear reactor in jeopardy with the potential core damage and a radiological release, i.e., an American Chernobyl," he writes. </p>
<p>Orrik says OSRE is the only program NRC has that directly focuses on the terrorist threat against nuclear power plants, whether by overt or surreptitious attack. </p>
<p>"And now there is increasing pressure throughout the nuclear power industry to reduce costs, and security forces are taking direct hits; reduction in annual budgets, reduction in number of security officers," Orrik says. "A countervailing pressure is necessary." </p>
<p>In 1999, the Clinton administration decided to keep the OSRE program in place but assured industry the NRC would work toward a program whereby utilities would conduct self-assessments of a portion of their nuclear plants' security, says Paul Gunter, director of the reactor watchdog project at the Nuclear Information and Resource Service. </p>
<p>Industry observers note that prior to the Sept. 11 attacks, the NRC and nuclear plant operators had argued against tighter security at plants because there was no evidence of a credible terrorist threat. </p>
<p>Edwin Lyman, scientific director for the Nuclear Control Institute in Washington, D.C., says the nuclear industry will probably wait until the current panic subsides before it pushes again for self-assessment of its security operations as an alternative to the NRC assessing its protection mechanisms. "The industry is totally opposed to being graded," Lyman says. </p>
<p>Even after the original bombing of the World Trade Center in 1993, the NRC relied on trends indicating that nuclear plants were unlikely to be attractive targets of terrorists, says Bennett Ramberg, author of several books on nuclear power and weapons, including . While there is no evidence of cases where terrorists have successfully sabotaged a nuclear reactor anywhere in the world, Ramberg notes recent news from South Asia shows that Pakistani mujaheddin have threatened to sabotage Indian nuclear reactors. </p>
<p align="RIGHT">-M.H. </p>
</td>
</tr>
</table>
<p>"Despite the rise in incidents and the educational experience of preparing for the Year 2000 conversion exercise, surveys and anecdotal evidence have shown that awareness of potential threats and vulnerabilities, linked to the industry's growing dependency on information systems, is relatively low," NERC said in the study. "To assure the same high levels of service capability into the 21st century, utility executives and their heads of operations, physical security, and cyber security must take steps now to protect their assets, their service, and their public image against the increasing tide of threat and disruption." </p>
<p>NERC recommends that the entire energy sector, as well as the telecommunications and banking industries, participate in regional interdependency simulation exercises to gain a better understanding of how the industries interact. "The value of such tabletop exercises was recognized in the late 1980s by the National Electric Security Committee formed by NERC at the behest of the United States government's National Security Council, as it addressed an increase in state-sponsored global terrorism," the study said. </p>
<p>The electricity sector, NERC noted, may want to take the lead in bringing these industries together to enhance infrastructure security for the Salt Lake City Winter Olympics next year. </p>
<h3>Quick, Hide the GIS Data </h3>
<p>The Interstate Natural Gas Association of America (INGAA), the gas pipeline industry lobbying group, has been coordinating with its member companies to beef up security at above-ground facilities and along pipeline rights-of-way, says Martin Edwards, director of legislative affairs for the association. </p>
<p>Many in the energy industry, including INGAA, have urged the federal government to limit the level of information available to the general public about the location of energy facilities. For example, the Office of Pipeline Safety, a regulatory and enforcement agency inside the Department of Transportation, decided to curtail access to its brand new National Pipeline Mapping System, a geographic information system database containing locations and attributes of gas pipelines, hazardous liquid lines, and liquefied natural gas facilities operating in the United States. </p>
<p>Because it took the NPMS off its public Web site, OPS plans to provide information from its mapping database to particular pipeline operators and other energy companies on an as-needed basis, DOT spokesperson Patricia Klinger says. OPS, though, has not determined whether it will return the mapping database to its Web site. </p>
<p>In a safety advisory issued Sept. 11, OPS told pipeline operators not to discuss specific details of their security arrangements. Generally, pipelines have increased patrols and video surveillance of pipeline facilities. With saboteurs and terrorists possibly still operating inside the United States, "there's a fear they are very crafty," Klinger says. </p>
<p>While there is a history in South America and Africa of political insurgents targeting oil and gas pipelines, similar activity rarely has occurred in the United States. Nonetheless, Edwards says INGAA believes it was critical for the government to remove any detailed GIS maps that could serve as a guide for potential saboteurs. </p>
<p>INGAA has been working with the NIPC since the department's inception in 1997 and has a good relationship with them, Edwards explains. </p>
<p>Perhaps the most dramatic security measure directly affecting the gas industry occurred in the Boston area where, as a security measure, the U.S. Coast Guard halted shipments of liquefied natural gas (LNG) to Distrigas' import terminal in Boston Harbor. LNG plays an important role in the New England gas supply picture, which includes an increasing number of gas-fired power plants. LNG provides 25 percent of New England's daily peak gas supply in the winter and 15 percent of the region's total gas supply, according to the New England Gas Association. </p>
<p>While the price of gas in New England may spike due to LNG import restrictions, the opposite may be true for heating oil this winter, according to Robert Cuomo, a principal with the DRI-WEFA, a Lexington, Ma.-based consulting firm. The demand for jet fuel will plummet this winter with the slowdown in air travel, which will translate into refineries producing more distillate fuels such as heating oil, Cuomo says. </p>
<h3>Decentralize and Diversify </h3>
<p>A presidential commission in 1997 issued a report, "Critical Foundations: Protecting America's Infrastructures," that noted "the significant increase in the proportion of oil transported via pipelines over the last decade provides a huge, attractive, and largely unprotected target array for saboteurs. Elements of the pipeline system that could be targeted include lines at river crossings, interconnects, valves, pumps, and compressors." </p>
<p>For the electric power industry, the commission report said the most significant physical vulnerabilities appear to be related to substations. "There is general agreement that since the industry designs for stability during single and certain double failures, a coordinated attack on multiple targets would be required to cause a significant disruption to service," the report said. "Furthermore, such an attack would need to hit multiple targets simultaneously or in rapid sequence." </p>
<p>In its national energy plan, the Bush administration last spring noted that the nation's energy infrastructure "is vulnerable to physical and cyber disruption that could threaten its integrity and safety." </p>
<p>Some politicians and environmentalists contend the Sept. 11 attacks show the industry should not rely so much on large, centralized plants and should instead focus on independent power producers and renewable sources. </p>
<p>George Friedman, chairman of STRATFOR, a geopolitical consultant, says power plants and refineries are potential targets because they "are not subject to rapid regeneration." United States energy infrastructure has inclined toward concentration and efficiencies of scale because there was the perception that terrorists would not strike on U.S. soil. "That creates a substantial vulnerability," Friedman said during a Sept. 24 conference call on energy infrastructure security. </p>
<p>While nothing good can come out of the Sept. 11 attacks, energy independence should now be an issue government officials address in a serious manner, said Hugh Holman, senior research analyst at CIBC World Markets. In 1979, President Carter told the United States that by 1990, it should have decreased by half its reliance on imported oil. Instead, oil imports climbed considerably, Holman notes. "One of the things we can do is ... adopt alternative energy sources other than oil," Holman says. </p>
<p>Seth Dunn, a research associate at the Worldwatch Institute, says distributed generation (DG) has the potential to offer the same reliability for electric power that the Internet has for communications. "DG can provide an invaluable hedge," Dunn said. </p>
<p>In moving to a more decentralized energy structure, Robert Jablon, a Washington-based energy attorney, argues security would be enhanced by a greater focus on local energy production, at least as a backup. "One area of concern is the consequence of disruption of the electricity transmission grid," Jablon said. "In these regards, more attention may also need to be paid to advancing distribution generation." </p>
<p>After winning a ringing endorsement in President Bush's national energy plan released last spring, the nuclear power industry may encounter some turbulence in the short-term from the Sept. 11 attacks. Nevertheless, nuclear power from existing plants will remain economically competitive in terms of cost of producing energy in a period that may see extreme volatility in the price of oil and gas, Cuomo explains. </p>
<p>For the energy industry as a whole, Cuomo says it, like all other industrial sectors, is certain to be hurt by the short-term economic effects from the World Trade Center and Pentagon attacks. The economic rebound that analysts were forecasting for the fourth quarter of this year prior to Sept. 11 probably will begin to occur no earlier than the second quarter of 2002 because of the disruptions, he predicts. </p>
</p>
<p><b>Articles found on this page are available to Internet subscribers only. For more information about obtaining a username and password, please call our Customer Service Department at 1-800-368-5001.</b></p>
</blockquote>
</div></div></div><div class="field field-name-field-members-only field-type-list-boolean field-label-above"><div class="field-label">Viewable to All?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-article-featured field-type-list-boolean field-label-above"><div class="field-label">Is Featured?:&nbsp;</div><div class="field-items"><div class="field-item even"></div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-above clearfix">
<div class="field-label">Tags:&nbsp;</div>
<div class="field-items">
<a href="/tags/arizona-public-service">Arizona Public Service</a><span class="pur_comma">, </span><a href="/tags/bc">BC</a><span class="pur_comma">, </span><a href="/tags/boeing">Boeing</a><span class="pur_comma">, </span><a href="/tags/chernobyl">Chernobyl</a><span class="pur_comma">, </span><a href="/tags/commission">Commission</a><span class="pur_comma">, </span><a href="/tags/con-edison">Con Edison</a><span class="pur_comma">, </span><a href="/tags/department-energy">Department of Energy</a><span class="pur_comma">, </span><a href="/tags/dg">DG</a><span class="pur_comma">, </span><a href="/tags/dr">DR</a><span class="pur_comma">, </span><a href="/tags/edison-electric-institute">Edison Electric Institute</a><span class="pur_comma">, </span><a href="/tags/entergy">Entergy</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission">Federal Energy Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/federal-energy-regulatory-commission-ferc">Federal Energy Regulatory Commission (FERC)</a><span class="pur_comma">, </span><a href="/tags/ferc">FERC</a><span class="pur_comma">, </span><a href="/tags/gis">GIS</a><span class="pur_comma">, </span><a href="/tags/infrastructure">Infrastructure</a><span class="pur_comma">, </span><a href="/tags/ingaa">INGAA</a><span class="pur_comma">, </span><a href="/tags/interstate-natural-gas-association">Interstate Natural Gas Association</a><span class="pur_comma">, </span><a href="/tags/interstate-natural-gas-association-america">Interstate Natural Gas Association of America</a><span class="pur_comma">, </span><a href="/tags/nei">NEI</a><span class="pur_comma">, </span><a href="/tags/nerc">NERC</a><span class="pur_comma">, </span><a href="/tags/nga">NGA</a><span class="pur_comma">, </span><a href="/tags/nrc">NRC</a><span class="pur_comma">, </span><a href="/tags/nuclear">Nuclear</a><span class="pur_comma">, </span><a href="/tags/nuclear-energy-institute">Nuclear Energy Institute</a><span class="pur_comma">, </span><a href="/tags/nuclear-energy-institute-nei">Nuclear Energy Institute (NEI)</a><span class="pur_comma">, </span><a href="/tags/nuclear-regulatory-commission">Nuclear Regulatory Commission</a><span class="pur_comma">, </span><a href="/tags/ot">OT</a><span class="pur_comma">, </span><a href="/tags/pacific-northwest">Pacific Northwest</a><span class="pur_comma">, </span><a href="/tags/president-carter">President Carter</a><span class="pur_comma">, </span><a href="/tags/president-clinton">President Clinton</a><span class="pur_comma">, </span><a href="/tags/reliability">Reliability</a><span class="pur_comma">, </span><a href="/tags/security">Security</a><span class="pur_comma">, </span><a href="/tags/storage">storage</a><span class="pur_comma">, </span><a href="/tags/str">STR</a> </div>
</div>
Thu, 01 Nov 2001 05:00:00 +0000puradmin10568 at http://www.fortnightly.com